A5 Western Transport Corridor: Macro- Economic Study
A Final Report for Mouchel
Ref: 796036 / 2700 / INC / R / 001
A5 Western Transport Corridor: Macro-Economic Study A Final Report for Mouchel
C3803 / May 2009
ECOTEC
Vincent House, Quay Place 92-93 Edward Street Birmingham B1 2RA United Kingdom
T +44 (0)845 313 7455 F +44 (0)121 212 8899 www.ecotec.com
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Contents PAGE
1.0 Introduction ...... 1 1.1 ECOTEC Appointment ...... 1 1.2 Scope of the Study...... 1 1.3 A5 Western Transport Corridor...... 1 1.4 Study Approach...... 2 1.5 Structure of Report ...... 3
2.0 Transport Infrastructure and Economic Development ...... 4 2.1 Introduction ...... 4 2.2 Theoretical Perspectives ...... 4 2.3 Understanding Wider Impacts...... 5 2.4 Evidence from the Literature...... 6 2.4.1 SACTRA...... 6 2.4.2 Eddington ...... 8 2.4.3 Microeconomic Drivers...... 9 2.5 Strategic Summary: Transport and Economic Development...... 10
3.0 Strategic Policy and Development Aspirations...... 11 3.1 Introduction ...... 11 3.2 Northern Ireland and Regional Policy...... 11 3.2.1 Regional Development Strategy (RDS)...... 12 3.2.2 Regional Transport Strategy (RTS) ...... 13 3.2.3 Economic Policy ...... 14 3.2.4 Investment Strategy (ISNI) ...... 15 3.3 Local Policy and Development Initiatives ...... 16 3.3.1 Roads to Opportunity ...... 16 3.3.2 Spatial Development and Planning ...... 16 3.3.3 Economic Development Strategy ...... 17 3.4 Strategic Summary: Strategic Policy Appreciation...... 18
4.0 Economic Profiling and Performance Assessment ...... 20 4.1 Introduction ...... 20 4.2 Economic Domains and Indicators...... 20 4.3 Economic Scale...... 21 4.4 Dynamism ...... 22 4.5 Sector Structure ...... 23
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4.6 Inward Investment...... 24 4.7 Enterprise...... 25 4.8 Labour Market...... 27 4.9 Economic Outcomes...... 27 4.10 Economic Profile of the A5 WTC...... 28 4.11 Wider Economic Audit – Republic of Ireland ...... 30 4.11.1 Economic Scale...... 30 4.11.2 Dynamism ...... 31 4.11.3 Sector Structure ...... 31 4.11.4 Labour Market ...... 33 4.11.5 Economic Outcomes ...... 33 4.12 Strategic Summary: Economic Performance Assessment...... 34
5.0 A5 WTC: Issues and Evidence from Business Survey and Consultations ...... 35 5.1 Introduction ...... 35 5.2 Survey Design and Objectives ...... 35 5.3 Business Profile and Operations ...... 35 5.3.1 Key activity of business at site...... 35 5.3.2 Description of business ...... 36 5.3.3 Length of time business has been in operation ...... 36 5.3.4 Size and geographical scope of operations...... 37 5.3.5 Business performance and outlook ...... 40 5.4 Role of Transport and Importance of the A5...... 41 5.4.1 Primary mode of transport...... 41 5.4.2 Dependency on the A5...... 41 5.4.3 Importance of the A5 to businesses ...... 42 5.4.4 Problems or constraints as a result of the present A5 ...... 42 5.4.5 Predictions of change in traffic conditions on the A5 over the next 10 years...... 43 5.4.6 Impact on business operations of improvements to A5 ...... 43 5.5 A5 WTC: Stakeholder Views on Potential Economic and Regeneration Impacts...... 44 5.5.1 Balanced regional development ...... 44 5.5.2 North West Gateway ...... 45 5.5.3 Inward investment and investor perceptions ...... 45 5.5.4 Urban regeneration ...... 46 5.5.5 Tourism and visitor economy...... 47 5.5.6 Other potential benefits ...... 48 5.5.7 A5: caveats and dependencies ...... 48
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5.6 Strategic Summary: Views of Business and Stakeholders ...... 49
6.0 A5 WTC: Analytical and Modelling Results ...... 52 6.1 Introduction ...... 52 6.2 Wider Impacts: Revisiting the Literature...... 52 6.2.1 Department for Transport - Transport Analysis Guidance (TAG) ...... 53 6.2.2 Evidence from previous studies...... 54 6.3 Wider Impacts: A5 WTC (DfT Approach)...... 56 6.3.1 Agglomeration ...... 57 6.3.2 Change in Output in Imperfectly Competitive Markets ...... 60 6.3.3 Labour Market Impacts...... 60 6.3.4 Summary Impacts – Total...... 63 6.4 Wider Impacts: A5 WTC (REMI approach)...... 63 6.4.1 REMI Results ...... 66 6.5 Wider Impacts: A5 WTC Summary Results...... 67 6.5.1 Wider Impacts: TAG vs. REMI-ECOTEC Model...... 68 6.6 Strategic Summary: A5 Analytical and Modelling Results ...... 69
7.0 Strategic Summary and Conclusions ...... 71 7.1 Scope of the Study...... 71 7.2 Strategic Policy Appreciation...... 71 7.3 Economic Performance Assessment ...... 72 7.4 A5 WTC: Evidence of Impact from Businesses and Stakeholders ...... 73 7.5 A5 WTC: Evidence of Impact from Quantitative Analysis and Modelling...... 74 7.6 Concluding Remarks...... 75
Annex One: Consultees ...... A1
Annex Two: Economic Profiling and Performance Assessment .....A3
Annex Three: Survey Questionnaire...... A6
Annex Four: Detailed Method and Data Sources ...... A13
Annex Five: REMI-ECOTEC Model ...... A21
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1.0 Introduction
1.1 ECOTEC Appointment
ECOTEC Research and Consulting Ltd. were commissioned by Mouchel in May 2008 to undertake research to prepare a macro-economic study in relation to the proposed upgrading of the A5 route between Londonderry and Aughnacloy in Northern Ireland (A5 Western Transport Corridor).
1.2 Scope of the Study
The study brief 1 provides a clear guide to both the objectives and overall scope of the macro-economic research: In summary:
• investigate what impact the A5 upgrade is likely to have in regenerating the local area of the road and the practical effects of this regeneration; • prepare an economic impact report for the scheme and to provide estimates of the prospective Wider Impacts (WI); and • assist the traffic team in estimating future traffic demand that might occur on the scheme as a result of regeneration/ economic growth.
Whilst the overall importance of the A5 to the Northern Irish economy is widely acknowledged, its role and contribution remains poorly understood and lacking empirical evidence at the present time. The macro-economic study will go a considerable way towards addressing this deficit.
The outputs from this study will form a significant part of the evidence base required for the Stage 2 Scheme Assessment Report (SAR), scheduled for completion in June 2009.
1.3 A5 Western Transport Corridor
On behalf of Roads Service (Northern Ireland), the Mouchel Group is responsible for preparing the design of the proposed new road scheme for upgrading the A5 Route between Londonderry and Aughnacloy.
The A5 is a major primary route in Northern Ireland. It travels through County Londonderry and County Tyrone, commencing in the city of Londonderry, passing the
1 A5 Western Transport Corridor – Northern Ireland: Brief to Economic Consultants, (2008), Mouchel Group
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large towns of Strabane and Omagh before it meets the N2 at the border with the Republic of Ireland towards the final destination of Dublin. From an all-Ireland perspective the A5 can be seen as an extension of the Irish N2 road and thus is the main route from Dublin to Londonderry and Donegal.
By far the single largest road project ever to be undertaken in Northern Ireland, the proposed A5 upgrade will see 88km of road either widened or re-routed and upgraded as part of ambitious plans by the Roads Service to enhance transport links in Northern Ireland. The A5 upgrade forms part of wider plans to improve connections between Dublin and Londonderry and is one of five key transport corridors identified in the regional transportation strategy for Northern Ireland (RTS).
The A5 upgrade follows work started on the A4 between Ballygawley and Dungannon, which connects the A5 with the M1, and the N14 between Lifford and Letterkenny, which connects the A5 with County Donegal in the Republic of Ireland.
Overall, it can be anticipated that the upgrading of the A5 will be of considerable consequence to the future development of the Northern Irish economy. Moreover, and reflecting the fact that a significant proportion of the A5 upgrade will also be funded by the Republic of Ireland, there may also be substantial anticipated benefits from the project in the Republic of Ireland, particularly in County Donegal.
1.4 Study Approach
In meeting the aim and objectives of the study our research has comprised a number of principal tasks:
• Inception and subsequent progress meetings held with representatives of the Mouchel client team; • Desk research review and assessment of national/ regional and local strategy documents and research reports of particular relevance to the A5 WTC; • Desk review of comparable schemes and with relevant research from other parts of the UK; • Profiling and performance assessment of the underlying economic architecture of the WTC using ECOTEC's LEAM (Local Economy Audit Model) model; • Telephone survey of businesses located within or in close proximity to the WTC, to identify current transport issues and inefficiencies, together with likely impacts of the proposed A5 scheme on business operations;
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• A programme of consultations undertaken with key partner organisations in Northern Ireland (NI) and the Republic of Ireland (ROI) to further establish views on the potential economic impacts of the scheme; • Economic analysis and modelling of prospective wider impacts, including application of a bespoke economic model – the REMI-ECOTEC Model - to the study area; • On the basis of the above primary and secondary research and analysis, development of a macro-economic study.
1.5 Structure of Report
The remainder of this report is structured as follows:
Section 2: Transport Infrastructure and Economic Development – considers central issues of the debate connected to transport and economics, together with assessment of the latest available evidence.
Section 3: Strategic Policy and Development Aspirations – presents a concise review of national/ regional and local policy documents which provide the strategic context for the A5 WTC. The policy assessment considers the wider policy arguments and, specifically, the economic policy basis, underpinning the upgrading scheme.
Section 4: Economic Profiling and Performance Assessment – examines the fundamental economic architecture of the Corridor and undertakes performance profiling through application of ECOTEC's Local Economy Audit Model.
Section 5: A5 WTC: Issues and Evidence from Business Survey and Consultations – presents findings relating to anticipated economic and regeneration impacts based on the outputs of our business survey and consultations held with strategic stakeholders.
Section 6: A5 WTC: Analytical and Modelling Results – sets out our methodological approaches to the calculation of economic impacts, and presents headline results based on our analytical and modelling work.
Section 7: Strategic Summary and Conclusions – summarises and distils our principal analytical results and considers the implications of these in terms of strategic policy and economic development aspirations for the Corridor.
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2.0 Transport Infrastructure and Economic Development
2.1 Introduction
In this section we consider emerging evidence from the academic and professional literature with particular regard to the relationship between transport infrastructure investment and prospective economic impacts. Specifically, we set out in more detail the mechanisms through which transport investment may be expected to trigger resultant economic effects, and further investigate the empirical relationship between transport schemes and economic development.
2.2 Theoretical Perspectives
The evidence on the interrelationships between transport infrastructure investment and economic development is rather less satisfactory than might be wished. It is clear that areas served by relatively poor infrastructure can achieve reasonable levels of prosperity (Norwich sometimes being cited as a case in point) and that a good infrastructure will not in itself generate prosperity (as the example of Merseyside serves to emphasise). What infrastructure improvements can do, however, it is to remove a possible constraint on economic development when the other necessary elements for it to occur are present.
At a regional level transport improvements may impact on economic performance in a number of different ways:
• Micro-level/ Consumer Benefits – the direct benefits to the consumer (whether a firm or an individual) of transport improvements can be measured in time saved and reduced costs. Such impacts are part of a conventional cost-benefit analysis and are the output of transport models. Time savings are typically translated into a financial value on the basis of value of time (VOT) and vehicle operating cost (VOC) estimates. • Wider Impacts – this refers to the impact of transport schemes on productivity and competitiveness. It builds on the conventional analysis of costs and time-savings to understand how such effects are translated into wider, macro-level outcomes on key economic variables – productivity, employment, GDP etc. Wider impacts lie both in reducing costs of existing economic interactions and enabling new interactions. • Inward Investment, Locational Patterns and Land Use – transport schemes can impact on the locational decisions of firms and can influence housing policy and other land
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uses. Locational patterns may not, however, be fully explained through analysis of wider impacts. • Spending Patterns and Visitor Economy – transport may hold an important influence on the willingness of consumers and visitors to travel, therefore having implications for the retail and tourism sectors.
2.3 Understanding Wider Impacts
A number of discrete areas are referred to when describing wider impacts. Three key elements, in line with the treatment of wider impacts in the Department for Transport's TAG guidance 1, are described below:
Agglomeration Impacts: The term agglomeration refers to the concentration of economic activity in an area. Transport can act to increase the accessibility of an area to a greater number of firms and workers, thereby impacting on the level of agglomeration. Empirical evidence demonstrates that the level of agglomeration affects the productivity of firms and workers in an area, even after controlling for characteristics specific to firms and workers in that area. Agglomeration has an impact on UK welfare through its impact on productivity and UK Gross Domestic Product (GDP). Higher UK GDP would provide a means to allow for higher UK consumption, thereby impacting on ‘welfare’ or ‘wellbeing’.
Output Change in Imperfectly Competitive Markets: In most cases, markets are not ‘perfectly competitive’ and this can lead to lower production and higher prices than would exist in the case of a competitive market, normally to the detriment of consumers and the economy as a whole. A reduction in transport costs (to business and/ or freight) allows for an increase in production or output in the goods or service markets that use transport. Better transport provision may result in less congestion and hence enable a firm to carry out more deliveries in a day (i.e. increase output). A transport intervention that leads to an expansion of output will deliver a welfare gain as consumers of the goods and services will value any increases in production by more than the cost of the additional units of production. This constitutes a welfare gain not appraised within other user benefits.
Labour Supply Impacts: Transport costs are likely to affect the overall costs and benefits to an individual from working. In deciding whether or not to work, an individual will weigh travel costs against the wage rate of the job travelled to. A change in transport costs is therefore likely to affect the incentives of individuals to work and hence the overall level of labour supplied in the economy. The extent to which potential workers are employed in our economy affects the level of UK GDP. The more we can make efficient use of our ‘human
1 Wider Impacts and Regeneration – TAG Unit 2.8 (2009), Department for Transport
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resource’, the more output the UK can potentially produce. Higher UK GDP provides a means to allow for higher UK consumption, again therefore impacting on ‘welfare’ or ‘wellbeing’. The level of labour supply can impact on welfare not just through GDP but also through benefits and disbenefits to individuals depending upon whether they like or dislike working. However, these (non-GDP) benefits are already captured via appraisal of commuter user benefits. Transport can also affect the incentives for firms and workers to locate and work in different locations. Employment growth or decline in different areas is likely to have implications for productivity, as workers are often more or less productive in different locations. This may have implications for UK productivity which, in turn, will impact on UK welfare. The extent to which workers are employed in their most productive uses in high productivity jobs affects the level of UK GDP. By impacting on the overall productivity of jobs across the economy, transport has the potential to affect UK GDP and in turn ‘welfare’ or ‘wellbeing’.
2.4 Evidence from the Literature
Empirical evidence of the economic benefits of transport infrastructure schemes is relatively under-developed, with evidence from the literature remaining somewhat inconsistent. Whilst there are many historical examples of transport innovations driving or enabling large scale economic growth (for example, canals in the 18 th Century), the evidence for the impact of incremental transport improvements is less clear. Ex-ante studies suffer from the weakness of resting on generally plausible, but often largely unverified, hypotheses - typically about the relationship between changes in accessibility/ transport costs and some measure of regional economic development. Similarly, ex-post analysis of transport interventions has often struggled to separate the role of the infrastructure and other economic effects. Whilst transport and congestion are often sighted by businesses and policy makers alike as barriers to development and constraints on growth, such arguments all too often have relied on anecdotal evidence and opinions.
Previously, discussions relating to transport and economic development have often focussed on the locational decisions of businesses, in particular in relation to attracting inward investment. The difficulty of separating transport from the complex set of factors which determine the location of firms is clear. Further, a critical issue is connected to the extent to which changes in the location of activity may merely represent displacement .
2.4.1 SACTRA The Standing Advisory Committee on Trunk Road Assessment (SACTRA) is an independent committee appointed by the Secretary of State for Transport to advise on issues related to the appraisal of trunk roads. The committee was asked to consider the
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effects of transport projects and policies on the performance of the economy. The committee's report set out a number of ways through which transport could theoretically contribute to economic performance:
• Reorganisation or rationalisation of production, distribution and land use; • Effects on labour market catchment areas and hence on labour costs; • Increases in output resulting from lower costs of production; • Stimulation of inward investment; • Unlocking inaccessible sites for development; and • Triggering growth which in turn stimulates further growth.
SACTRA also note the 'two-way road' argument – that improved accessibility between two areas may sometimes benefit one area at the cost of the other as an impact of resultant patterns of land use or through competitiveness effects.
On the above theoretical mechanisms, the committee found that direct statistical and case- study evidence on the size and nature of the effects of transport cost changes was limited. The committee pointed out that, 'the state of the art of this important field is poorly developed and the results do not offer convincing general evidence of the size, nature or direction of local economic impacts' .
The SACTRA work on transport and economic performance concludes:
'…the theoretical effects listed can exist in reality, but that none of them is guaranteed. Our studies underline the conclusion that generalisation about the effects of transport on the economy are subject to strong dependence on specific local circumstances and conditions.' 1
More recently, some success has been found in relating transport to productivity. Work carried out by Imperial College London 2 has attempted to establish relationships between agglomeration – concentrations of activity – and productivity at a firm level. Agglomeration is measured in terms of effective density of employment in any location. The study concluded that agglomeration economies (returns to agglomeration) do exist in the UK although to a differing degree for different industry sectors. For example, agglomeration economies are less evident in primary industries but there are much larger correlations between agglomeration and productivity in service sectors. Overall, the study finds an elasticity of productivity with respect to agglomeration of 0.125, implying that a 10%
1 Transport and the Economy, Standing Advisory Committee for Trunk Road Assessment 2 Investigating the link between productivity and agglomeration for UK industries, (2006), Graham D, Imperial College London
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increase in the level of agglomeration is associated on average with a 1.25% increase in aggregate productivity 1.
Whilst the study focuses on effective density, rather than transport per se, the role of transport improvements delivering ease of access is clear. Further, the study finds that the use of a generalised cost based measure of effective density produces higher agglomeration elasticities, as it captures both time and distance dimensions of effective density.
2.4.2 Eddington The Eddington Review 2, a wide reaching attempt to better understand the relationship between transport and the economy in a UK context, concludes strongly that transport matters for economic performance of countries and regions. Importantly, the review notes that where the transport network is established, transport improvements are most likely to deliver economic benefit where the investment is a response to signals of transport demand exceeding capacity. It follows, therefore, that in areas where the efficiency of infrastructure is adequate, the existing provision of transport infrastructure is likely to be sufficient for continued growth without further increases in transport provision. On this basis, there is little strategic case for action in all places. Indeed, Eddington suggests that future transport policy and investment should be focussed on urban areas; commuter and intra-urban networks; ports; and airports that are showing signs of increasing congestion and unreliability.
It is also important to note that transport on its own is far from the complete answer to regenerating an area or region. It is widely accepted that the positive effects of transport investment (and its magnitude) are conditional on certain external pre-conditions: the availability of skilled labour; and a favourable environment for business investment 3. In other words, a transport link is unlikely to improve an unproductive urban area unless there is underlying demand for this connection. Moreover, in some instances, a link between two areas can result in displacement of economic activity, with the core benefiting at the expense of the periphery, and with little or no impact on national productivity and growth.
1 Notably, Graham's previous research which the DfT recommends reference to in the estimation of agglomeration impacts for scheme appraisals found a significantly lower elasticity of productivity with respect to effective density – 0.043. (See Wider Economic Benefits of Transport Improvements, (2005), Graham D, Imperial College London 2 The Eddington Study, Main Report to the Chancellor of the Exchequer and the Secretary of State for Transport, (2006) 3 See for example, Public capital and Long-run Costs in the UK, (1993), Lynde and Richmond; Economic Growth and Transport Infrastructure Appraisal, (2002), Trinder; and Linkages between Infrastructure and Economic Growth, (2003), O'Fallon.
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It follows that there is no simple, unambiguous link between transport provision and local regeneration 1.
Nevertheless, Eddington concludes that targeted, carefully planned transport infrastructure investment may be expected to significantly improve overall economic performance:
'…the performance of the UK’s transport networks will be a crucial enabler of sustained productivity and competitiveness: a 5 per cent reduction in travel time for all business travel on the roads could generate around £2.5 billion of cost savings – some 0.2 per cent of GDP.'
2.4.3 Microeconomic Drivers The Eddington Review identified a number of micro drivers of productivity that transport interventions can influence (by improving journey time, reliability, cost, connectivity, comfort, safety, and security) 2:
• business efficiency - through time, cost and journey reliability savings, particularly for business and freight traffic; • business investment and innovation – where direct savings (time, cost and reliability) lead to a higher rate of business investment; • clusters/ agglomerations – by facilitating the expansion of clusters/ agglomerations by reducing travel time and costs, bringing firms, workers and consumers closer than otherwise would be the case; • labour market – by supporting the overall efficiency and flexibility of labour markets, through better matching of people and skills to jobs; • competition – by offering consumers a greater choice of goods and services; and allowing businesses to trade over a wider, previously unattainable area, access more suppliers and reach more potential consumers; • domestic and international trade – through reductions in transport costs; and • globally mobile connectivity – by attracting, retaining and expanding globally and nationally mobile activity through good transport links.
Additionally, transport interventions can also contribute to social and environmental goals, which may ultimately impact on GDP and welfare.
1 Transport investment, transport intensity and economic growth, (1999), SACTRA 2 The Eddington Transport Study, (2006), Eddington
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2.5 Strategic Summary: Transport and Economic Development
• Wider Impacts relate to economic effects of transport infrastructure stemming from increased productivity. The key elements of wider impacts are: reduced costs of travel for businesses; agglomeration effects; and, improved access to labour supply.
• The evidence for the link between transport and economic development is mixed and the literature on the subject is relatively under-developed. However, a number of recent studies have more closely sought to establish robust links between transport and productivity.
• The evidence presented above suggests that under the right conditions transport can deliver significant GDP and productivity benefits, although the scale of this is difficult to assess. Moreover, whilst transport investment cannot in itself generate economic growth, a lack of requisite investment can serve as a primary constraint.
• The recent Eddington Review on the links between the economy and transport concluded that a 5% reduction in travel times for all business travel on roads could generate around £2.5bn of cost savings – some 0.2% of GDP.
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3.0 Strategic Policy and Development Aspirations
3.1 Introduction
This section provides a concise review and assessment of Northern Ireland regional and local strategic policies of particular relevance to the WTC. To the extent that these strategies and policies provide the operational context for the A5 scheme it is important to obtain a close understanding of the degrees of overlap and strategic alignment between transport and spatial planning objectives on the one hand and economic goals on the other. Further, a policy assessment can be expected to yield valuable insights surrounding the wider policy arguments and, specifically, the economic policy basis, underpinning the proposed A5 road investment scheme.
3.2 Northern Ireland and Regional Policy
A range of strategic documents and associated policy statements are of considerable relevant to the A5 WTC, with principal strategies summarised in Table 3.1.
Table 3.1 Principal National and Regional Strategies and Policy Documents Strategy Remit/ Purpose
Shaping Our Future: Regional RDS contains a Spatial Development Strategy and related Development Strategy for Strategic Guidelines for future development of NI based on hub, Northern Ireland 2025 (RDS) corridor and gateway framework for regional development.
Regional Transport Strategy RTS identifies strategic transport investment priorities in NI until for Northern Ireland 2002 - 2012. The purpose of the RTS is to support the RDS and to make 2012 (RTS) a significant contribution to achieving the longer-term vision for transportation.
Economic Vision for Northern Sets out the over-arching economic agenda for NI. The Economic Ireland (2005) Vision highlights the importance of investment in R&D and innovation, encouraging enterprise, skills development, and creating modern infrastructure .
Investment Strategy for ISNI presents infrastructure investment proposals across all Northern Ireland 2008-2018 sectors ('investment pillars') for the period 2005 – 2015. Detailed proposals for roads (within Network Pillar) are contained within the Investment Delivery Plan (IDP) for Roads.
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3.2.1 Regional Development Strategy (RDS) Developed in 2001, Shaping Our Future: Regional Development Strategy for Northern Ireland 2025 1 provides an overarching strategic framework for achieving a strong spatially balanced economy, a healthy environment and inclusive society. The vision is to create an outward-looking, dynamic and liveable region, whilst at the same time ensuring a high quality of life for all.
The Strategy incorporates a Spatial Development Strategy (SDS) which adopts a ‘hub, corridor and gateway framework’ to provide a strategic focus for future development and achievement of balanced growth within the Region by developing:
• The key link transport corridors and associated trunk road links [including WTC], as the skeletal framework for future physical development and the primary links to the regional gateways of ports and airports, connecting with the European and global communications network;
• A compact and dynamic metropolitan core centred on Belfast;
• A strong North-West regional centre based on Londonderry, the transport pivot and regional gateway for the North-Western corner of the island; and
• A vibrant rural Northern Ireland with balanced development spread across a polycentric network of hubs/clusters based on the main towns which will have a strategic role as centres of employment and services for urban and rural communities.
With regard to the WTC area, particular attention is directed to strengthening the position of Londonderry as the transport hub of the North West, including enhanced transport linkages to the Regional Strategic Transport Network (RSTN) and to towns in Donegal particularly to give better and more reliable journey times to the North West from Belfast and Dublin.
Notably, the RDS also categorises Omagh as a main hub in the spatial framework for Rural Northern Ireland and emphasises the need to strengthen the role of hubs in developing the network of rural service centres. It highlights that Omagh is already well established as the main centre in the West. As such it is expected to generate higher levels of future growth, reflecting its established role and strength as a local centre of economic activity in its sub-regional area.
1 Shaping Our Future: Regional Development Strategy for Northern Ireland 2025, (2001), DRDNI
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Under the RDS considerable emphasis is placed on a need to further exploit the economic development potential of the key transport corridors (SPG-ECON 2). In this regard the key transport corridors offer a development impetus based on larger consumer markets, links between cities, towns and gateways, and access to significant labour markets and rural catchment areas. These corridors can also be expected to facilitate the important linkages required with universities and other centres of higher education.
Critically, under the RDS a high quality strategic transport network, with quick and reliable journey times, has an essential role in stimulating a balanced spread of future growth in towns across the Region.
3.2.2 Regional Transport Strategy (RTS) The Regional Transportation Strategy for Northern Ireland 2002 – 2012 1 (2002), a 'daughter document' of the RDS, is directed at facilitating the implementation of a range of initiatives aimed at bringing about a marked change in the quality of infrastructure and services, in line with the longer-term transportation vision for the region.
As noted above, the A5, as the principal road between Londonderry and Dublin (passing through Strabane and Omagh) is identified as one of the key transport corridors on the Regional Strategic Transport Network (RSTN).
The RTS highlights that strategic highway improvements which upgrade routes on the RSTN can be expected to offer significant economic benefits resulting from journey time reductions and large savings in road reconstruction costs. This will help improve the employment prospects for communities in regeneration areas due to improved and additional transport provision and links. Particularly, the improvement and maintenance of rural roads, in combination with a range of new and innovative rural public transport initiatives, will work together to help regenerate the rural economy.
The Strategy specifically identifies a target to:
'Complete the following major strategic highway improvements on the RSTN – 13 bypasses, 85 km of dual carriageway, 36 kilometres of widened single carriageway, 11 major junction improvements'
In November 2005, the Government in the Republic of Ireland launched Transport 21 , a transport plan designed to deliver 21st century transport plan for 21st century Ireland. This plan recognises the importance of developing the strategic road links between North and
1 Regional Transportation Strategy for Northern Ireland 2002 – 2012, (2002), DRDNI
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South. The government intends improving the “strategic road links with Northern Ireland, and the West and North West by upgrading the N2, N3, N4 and N5 ”.
Again, importantly, the plan specifically identifies the N2 route to Monaghan (which links with the A5 through Omagh to Londonderry) as a key route for development. The Irish Government’s recognition of the importance of investing in the infrastructure in the North West was recently reinforced by the Taoiseach, Bertie Ahern (2005):
'Both County Londonderry and County Donegal have suffered over the years for various reasons. There is huge untapped opportunity. We need to give special attention to their problems and the issues faced by the broader North West region'.
3.2.3 Economic Policy The Economic Vision for Northern Ireland (2005) sets out the direction for economic policy for the ensuing decade. It contains a bold overarching vision for Northern Ireland as:
“a high value added, highly skilled, innovative and enterprising economy which enables us to compete globally leading to greater wealth-creation and better employment opportunities for all". 1
It emphasises the step change required to move from a long-standing over dependence on the public sector to a modern economy driven by business and focused on higher value added and innovative products and services. While the government will aim to ensure the conditions required to promote economic growth are put in place (and pledges to collaborate with key players to achieve objectives), there is nevertheless recognition that underlying economic fundamentals remain weak and that there are a number of significant challenges towards achieving this economic vision. These challenges include:
• restructuring the economic base of Northern Ireland which involves growing the private sector and reforming the public sector; • utilising public expenditure; • enhancing the appeal of NI to attract inward investment; and • supporting sustainable development
The key drivers towards achieving the government's economic vision for growth in Northern Ireland are held to be four fold:
1 Economic Vision for Northern Ireland, (2005), DETI p7
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• increased investment in R&D and promoting of innovation/creativity; • promotion and encouragement of enterprise; • ensuring our people have the right skills for future employment opportunities; and • ensuring we have a modern infrastructure in place to support business and communities .
With regard to modern infrastructure requirements, it is notable that transport investment is judged to be a key instrument both in terms of closing Northern Ireland's productivity gap (through improvements made to the roads network to reduce journey times for business traffic) and in reducing levels of economic inactivity (the removal of potential barriers to employment for sections of the workforce).
3.2.4 Investment Strategy (ISNI) The Investment Strategy for Northern Ireland 2008-2018 1 further recognises the critical role of infrastructure in delivering against economic, social and environmental priorities.
The ISNI also stresses the benefits of ensuring North - South cooperation in developing infrastructure, where appropriate, to help ensure more efficient planning and coordinated delivery of key projects. With regard to the North West, cooperation with Donegal is advocated, with further improvement of road links seen as a primary mechanism for tackling regional disparities.
Over the period of the strategy a key goal relates to significantly increasing the size of NI's motorway/ dual-carriageway network (part of the Trans-European Network) and upgrading selected link corridors and trunk roads – including opening of the A5 and remaining sections of the A8 dualling schemes.
The Investment Delivery Plan (IDP) for Roads underlines this commitment and notes that investment in Key Transport Corridor roads will be central to meeting the Executive's strategic objectives in terms of promoting economic growth and competitiveness and balanced regional development. In this regard NI Roads Service believes that meeting the RDS objective will require upgrading all of the Key Transport Corridors to at least dual carriageway standard.
The IDP goes on to provide further detail in respect of the A5, at 88km in length the single largest road scheme to be proposed in NI during the plan period. It is argued that construction will lead to significant benefits to the North West by improving linkages to and
1 Investment Strategy for Northern Ireland 2008-2018, (2008), Northern Ireland Executive
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from Dublin and reducing journey times within the North, thereby 'greatly enhancing the potential for economic growth and development in the region'.
3.3 Local Policy and Development Initiatives
As well as Northern Ireland regional strategies and policies described above, it can be anticipated that the A5 WTC scheme will also hold significant implications in terms of helping address and deliver a range of local policy and development initiatives.
3.3.1 Roads to Opportunity A strong case for addressing transport infrastructure requirements and shortfall in the WTC is provided by the Roads to Opportunity 1 document issued by the Irish Central Border Area Network (ICBAN) and North West Region Cross Border Group (NWRCBG). The report highlights a number of key issues confronting the North West region in terms of transportation, including:
• Journey times between regional centres and other centres are such that haulage costs may be up to 30% higher than average 2; • Cross-border alliances and business relationships have been inhibited on account of an historical lack of investment in roads infrastructure; • Tourism potential is similarly disadvantaged: an assertion apparently confirmed by recent research by Tourism Ireland, revealing poor tourism performance in the North West; • Poor connectivity and accessibility in terms of transportation corridors impairs the ability to compete in terms of business retention and relocation.
A cross-border approach to enhanced infrastructure provision in the form of two Major Inter Urban Corridors is advanced in response to the spatial development potential of the region. 3.3.2 Spatial Development and Planning An integrated approach to spatial development and economic growth in the North West is advocated under the auspices of the North West Gateway Initiative (NWGI), a cross- border partnership established in 2006 and covering Londonderry, Limavady and Strabane, and Donegal. As the regional city and transport hub of the North West, and with a hinterland spanning the political border, Londonderry has a dominant role to play in the
1 Ireland's North West – Roads to Opportunity, (2006), ICBAN and NWRCBG 2 Fermanagh District Council – Assessment of Dependence on Transportation Infrastructure, (2002), Peter Quinn Consultants
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development of the entire region. It follows therefore, that there is a strategic imperative to strengthen the role of the city as the key employment and business growth location for the wider North West.
The West Tyrone Area Plan 2019 1 Issues Paper is a consultation document intended to promote focused debate on issues which will need to be addressed in considering the new area plan for West Tyrone (covering Omagh and Strabane Districts). The aim of the plan will be to:
• manage growth based on sustainable patterns of development balanced across West Tyrone, in accordance with the RDS; • promote Omagh and Strabane towns as hubs within Northern Ireland and strengthen their roles as the principal administrative, trade, employment and residential centres; • consolidate the role of the local towns of Carrickmore, Castlederg, Dromore, Fintona, Newtownstewart and Sion Mills as service centres for their hinterlands; and • concentrate large-scale land use zonings within Omagh, Strabane and the other towns using a sequential and phased approach.
The location of Omagh and Strabane within the A5 WTC suggests that future prosperity will be closely linked to further cross-border co-operation, expanded economic networks and trade facilitated by infrastructure investment. Building on distinctive assets and attributes of the western borders, specific economic opportunities have been identified around a number of sectors/ activities 2, namely:
• Renewables • Building technologies/ construction • Eco-tourism
3.3.3 Economic Development Strategy Omagh's Economic Development Strategy 2006-2010 3 seeks to position Omagh as a key economic hub in the West. The strategy's four main themes cover, in turn: enterprise and employment; education, skills and lifelong learning; tourism, arts and culture; and enabling infrastructure.
1 West Tyrone Area Plan 2019 Issues Paper, (200), Planning Service 2 Developing the Ulster-Connaught Corridor: a spatial planning perspective, (2006), Boomer, C 3 Economic Development Strategy 2006-2010, (2006), Omagh DC
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The strategy recognises the importance of upgrading roads infrastructure as a necessary condition for promoting and strengthening Omagh's role as a commercial and administrative hub. As such, lobbying for the enhancement and development of A5/ N2 as a strategic route is identified as a principal action point.
The Strabane Community Plan 1 identifies key elements of the physical infrastructure that are judged to be needed in order to make the District work better. Central to this are roads infrastructure and the development/ enhancement of the District’s towns and villages. Much of Strabane’s economic and social activity is linked in some way to the use of the District’s main trunk road, the A5 Omagh - Strabane – Londonderry link. Strabane largely relies on the A5 for its connections with the ports and airports.
3.4 Strategic Summary: Strategic Policy Appreciation
• NI's transportation policy framework is intimately linked to the Region's economic policy and growth aspirations. Successive Government strategy documents consistently recognise the central role that transport plays in underpinning a successful regional economy.
• Under the RDS strong emphasis is placed on a need to further exploit the economic development potential of the Key Transport Corridors – including the A5 WTC. A high quality strategic transport network, with quick and reliable journey times, has an essential role in unlocking a balanced spread of future growth across the Region.
• The RTS has specifically been developed on the basis that creating an upgraded and integrated transport system, built around the RSTN and incorporating the Key Transport Corridors, is essential for the future prosperity of the region.
• Under NI's Economic Vision for a high value-added, highly skilled, innovative and enterprising economy, transport investment is identified as a key instrument in helping close NI's productivity gap and in reducing levels of economic inactivity.
• With particular regard to the A5 WTC, the IDP for Roads makes a forceful case that construction will serve to trigger significant benefits to the West by improved linkages to and from Dublin and reducing journey times within the North, thereby greatly enhancing the potential for economic growth in the Region.
1 Strabane Community Plan 2000-2006, Strabane DC
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• Cross-border co-operation directed at improving economic growth and competitiveness both North and South is strongly and consistently advocated (cf. ICBAN/ NWRCBG). The ROI Transport 21 plan recognises the importance of developing strategic road links between North and South, with the plan specifically identifying the N2 route – linking with the A5 – as a key route for development.
• As the regional city and transport hub of the North West, and with a hinterland spanning the political border, Londonderry has a dominant role to play in the development of the entire region. There is therefore a strategic imperative to strengthen the role of the city as the key employment and business growth location for the wider North West.
• Similarly, the further economic development and regeneration of Omagh and Strabane as commercial hubs for the West will be closely conditioned by cross-border co- operation, expanded economic networks and trade facilitated by road infrastructure investment.
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4.0 Economic Profiling and Performance Assessment
4.1 Introduction
This section examines the fundamental economic architecture of the A5 Western Transport Corridor (WTC). Specifically, it applies a bespoke version of ECOTEC’s LEAM Model (Local Economy Audit Model ) to the A5 WTC (defined here for analytical purposes as the combined areas of Londonderry, Dungannon, Omagh and Strabane) to provide a structural analysis of the current economic strengths and weaknesses of the Corridor. We also include a concise economic audit of the wider impact area, including the Border region in the Republic of Ireland (ROI).
4.2 Economic Domains and Indicators
Table 4.1 (below) illustrates the principal competitiveness and economic domains and indicators that have been used to inform the LEAM analysis.
Table 4.1 LEAM Economic Domains and Indicators Factor Description Economic Scale Comparative size or ‘economic mass’ – including employment, working age population and business stock Dynamism Recent growth performance and capacity; direction and pace of change – including employment, working age population, and business base Sector Structure Depth and composition of major sectors – including location quotient (LQ) analysis Inward Investment Inward investment and assistance; job creation Enterprise Profile and performance of small business sector (‘enterprise culture’) – including start-ups in financial and business services, business population rate, enterprise size and turnover Labour Market Skills base and workforce profile – including skills attainment and economic activity Economic Comparative headline economic performance – including average earnings Outcomes (proxy for labour productivity) and employment Source: ECOTEC Research and Consulting
The key results of the analysis are presented in the form of charts and statistical tables. The interpretation of research findings is used to identify and assess different attributes of the A5 WTC's economic profile and performance, set against NI averages and benchmarks.
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For all domains the indicator scores are indexed against the national average (NI=100), whilst the rank represents the position of individual districts in relation to the other NI districts (26 in total).
Further details on individual indicators are provided in the
4.3 Economic Scale
‘Scale’ is a major factor in the classification of any local economy; overall size being important in determining a local economy’s relative position within the wider economic system. Attaining a certain level of scale or economic ‘mass’ may also confer particular competitive advantage in terms of the composition of local markets and the representation of key institutions and infrastructure.
We have measured the scale of the economy of the A5 WTC using key indicators relating to the resident working age population, total workplace employment and business stock. Individual scores have been combined to create a composite index score 1 for economic scale. The results are set out in the table below.
Table 4.2 Economic Scale
Source: ECOTEC Analysis, 2008
In summary, the data illustrates that: • The A5 WTC, as represented by Londonderry, Dungannon, Omagh and Strabane, currently comprises a comparatively small focus of employment activity within NI. Indeed, the scale of local employment is relatively under-represented in comparison to the local population base – the WTC accounts for 13.9% of NI employment, as opposed to 14.8% of NI population.
• Perhaps surprisingly, businesses would appear relatively well represented in the WTC - accounting for some 17% of all VAT registered businesses in NI. To a considerable
1 Composite scores for each factor represent un-weighted averages of underlying indicator scores.
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degree this is likely to reflect the sectoral composition of the local economy, with many micro businesses and sole traders disproportionately concentrated in particular sectors, notably agriculture.
• Unsurprisingly, Londonderry represents the principal economic centre within the WTC, being ranked 2 nd and 3 rd respectively in the national 'league table' in relation to the scale of the working age population and local employment base.
• Conversely, Strabane represents the local area characterised by the least developed economic and business base.
4.4 Dynamism
Dynamism refers to the growth performance and capacity of a local economy. We have measured dynamism using the key indicators of change in employment, the working age population and business base. The results are set out in the table below.
Table 4.3 Dynamism
Source: ECOTEC Analysis, 2008
In summary, the data suggests that:
• Whilst the A5 WTC, with the exception of Londonderry, is relatively small in terms of overall economic scale, it is the case that the area has experienced significant growth in the last few years, particularly in terms of employment.
• Notwithstanding the significant growth in employment, growth in terms of the local business stock has been relatively weak in the WTC, suggesting that the growth in employment have largely been generated in existing businesses as opposed to new enterprises.
• Notably, Londonderry’s growth performance has been significantly stronger than the case nationally across all core dynamism indicators.
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• Dungannon exhibits the strongest growth performance in relation to the working age population and employment within the WTC, though, again, growth in the volume of local businesses has been relatively weak.
4.5 Sector Structure
The following chart provides an analysis of the sectoral base of local areas within the A5 WTC area relative to the Northern Ireland average as a basis for identifying over (and under) represented sectors within the economy.
Table 4.4 Sector Structure (LQ analysis 1), 2006
Londonderry Dungannon Omagh Strabane WTC A5
Agriculture, hunting and forestry n/a n/a n/a n/a n/a Mining & Quarrying n/a 3.3 1.7 3.1 n/a Manufacturing 0.9 2.4 0.8 1.3 1.2 Electricity, gas & water supply n/a n/a n/a n/a n/a Construction 0.8 0.9 1.8 2.4 1.2 Wholesale & retail trade; repairs 1.0 1.1 1.0 1.1 1.0 Hotels & restaurants 1.2 0.6 0.9 0.8 1.0 Transport, storage & communication 0.8 0.7 0.6 0.7 0.7 Financial intermediation 0.5 0.4 0.6 0.6 0.5 Real estate; business services activities 1.0 0.6 0.5 0.5 0.7 Public administration & defence 1.0 0.5 1.2 0.7 0.9 Education 1.2 1.2 1.2 1.4 1.2 Health & social work 1.2 0.7 1.3 0.7 1.1 Other services 0.9 0.4 0.8 0.8 0.8 Source: ECOTEC Analysis, 2008
In summary, the table indicates that:
1 A location quotient of 1 would suggest that local employment in the industry in questions is in line with national level sectoral employment shares. A LQ greater than 1 suggests a higher than average share of employment in that industry in the local area. Equally, a LQ less than 1 suggests a lower than average share of employment in that industry in the local area.
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• Notwithstanding degrees of recent sectoral change, the A5 WTC retains a relatively high concentration of employment in primary and production- based (construction and manufacturing) sectors.
• Conversely, and with the exception of public services, the WTC is characterised by an under-representation of employment in service-based activities 1. This is particularly apparent with regard to knowledge intensive services, such as financial services and business services, with this indicating a relatively weak 'knowledge economy' base.
• Locally, mining and quarrying is particularly pronounced in Dungannon and Strabane. Notably, Strabane, together with Omagh, also has a relatively high proportion of employment in the construction sector.
• Whilst employment in knowledge intensive services such as financial intermediation and business services is generally poorly represented across the WTC as a whole, business activities are more prevalent in Londonderry (on a par with the NI average), chiefly on account of Londonderry's expanding role as a major commercial hub.
• As suggested above, non-market service sectors (such as health and education) employ a relatively large proportion of people in the WTC, but particularly in Omagh and Londonderry.
4.6 Inward Investment
Inward investment represents the most direct and immediate form of employment generation. We have measured the inward investment performance using key indicators such as assistance and investment per head and total jobs created or safeguarded.
Table 4.5 Inward Investment
Source: ECOTEC Analysis, 2008
1 This is particularly the case in Strabane, with the district possessing a negligible office sector (public and private). Strabane's retail sector is also relatively small.
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In summary, the data reveals that:
• Londonderry is the largest recipient of assistance and investment per head with some £514 per head in assistance and £2,925 per head in investment. The number of jobs created and safeguarded resulting from the investment and assistance in Londonderry is 15 jobs per £1 million investment, slightly lower than the national average.
• Strabane also have a relatively strong inward investment performance and is actually ranked 1 st in terms of jobs created and safeguarded of all NI districts. With assistance of £175 per head, Strabane also performs well in terms of assistance received.
• Conversely, recent investment activity in Dungannon and Omagh would appear to have been weak in comparison with the other two districts in the WTC and the NI average.
4.7 Enterprise
In evaluating this factor we have considered the strength of local ‘entrepreneurial culture’ together with the associated competitive performance of SMEs. Whilst inward investment represents the most direct and immediate form of employment generation, increasingly, the impetus for future local economic and employment growth is likely to rest with the quality of indigenous small businesses. The results are set out in the table below.
Table 4.6 Enterprise
Source: ECOTEC Analysis, 2008
In summary, the data illustrates that:
• Headline figures would tend to suggest that the A5 WTC exhibits a relatively strong 'entrepreneurial culture' in comparison to the NI average, with a business population rate of 37 and business density of 562 VAT registered business per 10,000 adult population.
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• However, and with the notable exception of Londonderry, the proportion of start-ups in financial and business services (i.e. those activities typically related to knowledge economy sectors) within the A5 WTC, but particularly Omagh and Strabane, is relatively low compared to the NI average.
Building on the above analysis, the tables below shed further light on the enterprise performance of the A5 WTC. The analysis here focuses on the turnover and size profile of enterprise.
Table 4.7 Enterprise profile by turnover and employee sizeband, 2002
Source: ECOTEC Analysis, 2008
In summary, the data shows that:
• The A5 WTC is characterised by a significantly larger proportion of sole traders with no employees compared to the NI average. To a considerable extent, this is mirrored in the turnover profile of enterprises. Indeed, approaching one-half (43%) of all enterprises in the A5 WTC possess a turnover of less than £50,000, compared to only 1 in 3 (34%) across NI overall.
• Predictably, Londonderry differs from the other constituent A5 WTC areas in that it has a considerably higher proportion of businesses with a turnover of £500,000+ and a larger share of large businesses (200+ employees) – again reflecting the role of Londonderry as a major commercial centre.
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• In contrast to Londonderry, the other three constituent areas continue to be heavily reliant on sole traders and micro businesses: some two-thirds of businesses in Omagh, Strabane and Dungannon are categorised as sole traders. Consequently, almost one- half all businesses have a turnover of less than £50,000.
4.8 Labour Market
In evaluating the A5 WTC’s stock of human capital we have focused particularly on the skills profile mismatches between labour supply and labour demand. Higher skills levels may be considered an essential prerequisite to raising productivity, facilitating the shift towards higher value-added, higher wage economic specialisation.
Table 4.8 Labour Market
Source: ECOTEC Analysis, 2008
In summary, the data in Table 4.8 illustrates that:
• Overall, the A5 WTC possesses a relatively weak labour market profile, with a disproportionately large number of residents with No Qualifications compared to the NI average.
• Within the A5 WTC, Strabane exhibits a particularly weak labour market profile. Again, Londonderry tends to be the strongest performer, with many fewer residents having No Qualifications.
4.9 Economic Outcomes
Whilst Gross Value Added (GVA) is generally the most common indicator to evaluate economic outcomes, given limited availability of local area GVA estimates we have used employment rates and average earnings as headline economic outcome indicators. Notably, average earnings are often used as a proxy for productivity.
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Table 4.9 Economic Outcomes
Source: ECOTEC Analysis, 2008
In summary, the table shows that:
• In terms of headline economic outcome measures – namely the employment rate and level of average pay - the A5 WTC is underperforming against the NI average.
• Locally, Omagh would appear to be performing most favourably in terms of economic outcomes. Strabane scores notably poorly on both key economic outcome measures.
4.10 Economic Profile of the A5 WTC
The preceding analysis has benchmarked and evaluated the A5 WTC’s relative performance across a range of key competitiveness factors. By way of summary, the Corridor’s overall 'economic footprint' in illustrated in Figure 4.1.
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Figure 4.1 Economic Profile of the A5 Western Transport Corridor
Economic Scale Derry 200.0 + Dungannon 180.0 Omagh 160.0 Strabane 140.0 A5 WTC Northern Ireland 120.0 100.0 80.0 Economic Outcomes 60.0 Dynamism 40.0 20.0 0.0
Labour Market Enterprise
Source: ECOTEC Analysis, 2008
Positively, the A5 WTC represents a relatively dynamic and growing economy – albeit from a comparatively low base (economic scale). Some aspects of the Corridor's small business performance profile (a high business population rate) would also appear encouraging.
Less favourable is the Corridor's labour force profile, whilst the WTC's current sector structure remains skewed towards primary and production-based activities. The Corridor's knowledge economy base is shallow, with comparatively little local employment concentrated in market service sectors, including financial and business services.
Locally, Londonderry functions as the principal regional hub, and is characterised by substantial economic capacity and labour supply. Whilst Omagh has exhibited components of enhanced economic development during recent years, Strabane remains a notable underperforming within the Corridor.
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4.11 Wider Economic Audit – Republic of Ireland
Whilst it is anticipated that much of the resultant impact from the A5 scheme will accrue within the WTC, it is likely that proposed improvements will also have an impact on certain localities within the Republic of Ireland (ROI) - particularly given links with the N14 (north) and the N2 (south).
We have focused our economic assessment on the Border region (together with Dublin and Meath): the area considered most likely to benefit from an enhanced A5. While our analysis is structured around many of the same principal economic domains and indicators, due to data limitations some indicators and domains have been omitted from the assessment 1.
Similar to the NI analysis, the indicator scores are indexed against the national average (ROI=100), whilst the rank represents the position of individual districts in relation to the other ROI counties (27 in total).
4.11.1 Economic Scale Table 4.10 Economic Scale – Republic of Ireland
Source: ECOTEC Analysis, 2008
In summary, the table shows that:
• Whilst Dublin represents by far the largest single commercial centre, collectively, the Border region possesses significant economic scale, and is characterised by a working age population of approaching 300,000.
1 For most indicators the data presented for Northern Ireland is not directly comparable with that for Republic of Ireland so comparisons should be made with caution.
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• In terms of economic capacity Donegal is actually ranked 7 th and 9 th (out of 27) respectively in terms of working age population and employment.
4.11.2 Dynamism Table 4.11 Dynamism – Republic of Ireland
Source: ECOTEC Analysis, 2008
In summary, the table shows that:
• Whilst in many cases this is from a relatively low base, the Border region has been characterised by appreciable recent economic growth during recent years, especially in terms of employment expansion (+20%).
• Locally, Leitrim and Cavan have both recorded strong growth trajectories. Employment growth in Donegal has generally been on par with the ROI average, though the working age population has grown at a relatively low rate.
4.11.3 Sector Structure Table 4.12 Sector Structure (LQ Analysis), 2006 – Republic of Ireland
Dublin Meath Louth Leitrim Sligo Cavan Donegal Monaghan Border Border/Dublin/ Meath
Agriculture, forestry and fishing 0.1 1.0 0.6 2.0 1.4 2.1 1.4 2.2 1.5 0.5
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Dublin Meath Louth Leitrim Sligo Cavan Donegal Monaghan Border Border/Dublin/ Meath
Mining, quarrying and turf production 0.1 2.9 1.0 2.2 0.6 1.7 1.1 1.2 1.2 0.6 Manufacturing 0.7 1.0 1.2 0.9 1.1 1.2 0.9 1.3 1.1 0.8 Electricity, gas and water supply 1.0 0.7 0.9 1.1 1.1 0.7 1.0 0.7 0.9 1.0 Construction 0.7 1.3 1.0 1.4 1.0 1.3 1.3 1.3 1.2 0.8 Wholesale and retail trade 1.0 1.0 1.2 0.8 0.9 1.0 1.0 1.0 1.0 1.0 Hotels and restaurants 0.9 0.7 0.9 1.0 1.1 0.9 1.3 0.8 1.0 0.9 Transport, storage and communications 1.3 1.2 1.1 0.6 0.7 0.6 0.7 0.7 0.8 1.2 Banking and financial services 1.8 1.0 0.8 1.0 0.6 0.8 0.6 0.4 0.7 1.4 Real estate, renting and business activities 1.5 0.9 0.9 0.6 0.6 0.5 0.6 0.5 0.6 1.3 Public administration and defence 1.1 1.1 0.9 1.3 1.2 0.9 1.1 0.9 1.0 1.1 Education 1.0 0.9 1.0 1.0 1.1 0.8 1.2 0.9 1.0 1.0 Health and social work 1.0 0.9 1.1 1.3 1.5 0.9 1.2 1.0 1.2 1.0 Source: ECOTEC Analysis, 2008
In summary, the data illustrates that:
• In terms of its sectoral composition, the Border region retains a relatively high proportion of employment in traditional primary activities such as agriculture, forestry and fishing; mining, quarrying/ turf production; and manufacturing.
• In terms of its service economy, the Border region has a relatively high proportion of employment in public services (health and social services). Knowledge-based services such as financial services and business activities remain rather less well represented.
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4.11.4 Labour Market Table 4.13 Labour Market – Republic of Ireland
Source: ECOTEC Analysis, 2008
In summary:
• The Border region has a relatively weak labour market profile, with a low proportion of the resident population possessing third level education and a high proportion of people with only primary education (including no formal education).
• Donegal is a notably weak performer in this regard, with 1 in 4 residents who are aged 15+ possessing only primary education - compared against 15% nationally. Labour market participation rates are also significantly below average.
4.11.5 Economic Outcomes Table 4.14 Economic Outcomes – Republic of Ireland
Source: ECOTEC Analysis, 2008
In terms of key economic outcome measures:
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• Employment rates and levels of disposable income within the Border region are relatively weak.
• Notably, Donegal is ranked lowest on both measures, to a considerable extent reflecting the county's generally weak performance across other economic competitiveness factors.
4.12 Strategic Summary: Economic Performance Assessment
• Positively, the A5 WTC has been characterised by appreciable economic growth during recent years – albeit from a comparatively low base. Some aspects of the Corridor's small business performance (notably business population rates) also appear encouraging.
• However, it is the case that a number of other key aspects of the Corridor's economic profile remain deficient. The skills base of the resident workforce requires further improvement, whilst the sectoral focus of the Corridor remains skewed towards primary and production-based activities.
• Consequently, the knowledge economy base is shallow, with comparatively little local employment concentrated in market service sectors including financial and business services.
• Londonderry functions as an expanding commercial hub for the region, whilst there is also considerable evident to suggest that Omagh is an improving performer. Less encouragingly, Strabane remains a weak performing area within the Corridor.
• The Border region of the ROI may also be characterised as an area which has exhibited a strong growth trajectory, though one which continues to lack economic scale and one which is characterised by a generally unfavourable skills base.
• Notably, the adjacent county of Donegal records a weak attainment against headline economic outcome measures – to a considerable extent reflecting the area's largely weak performance across other economic competitiveness domains.
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5.0 A5 WTC: Issues and Evidence from Business Survey and Consultations
5.1 Introduction
In this section we review and provide further discussion of some of the key issues and arguments relating to the economic impacts of proposed improvements to the A5 WTC. Specifically, the material contained in the following section has been closely informed by the results of a survey of businesses located in the Corridor area, together with consultation interviews held with a number of strategic stakeholders with a particular interest in and/or knowledge of the WTC.
5.2 Survey Design and Objectives
The telephone survey of businesses sought to address a number of research objectives: to ascertain and understand the nature of operations, and key influences and constraints on current business performance; to establish the scope of any issues caused by transport inefficiencies and the likely impact of proposed A5 improvements on future business operations; and, to analyse the results by industrial sectors, geographical area and size of business.
During late August and early September ECOTEC's in-house CATI unit undertook a telephone survey which elicited a total of 152 responses from businesses located within the Corridor. The sample was appropriately stratified to reflect the geographical, sectoral and size distribution of the Corridor's business population. A copy of the survey questionnaire is included in the report Annex.
5.3 Business Profile and Operations
5.3.1 Key activity of business at site Reflecting earlier findings from our economic profiling and performance assessment (Section 4), survey results suggest a Corridor business population which continues to be skewed towards agriculture, local service (especially retail) operations, and public sector organisations.
• The most common activities undertaken by businesses respondents included retail/ wholesale (23% of businesses), public services (18%), farming (13%), together with activities falling within the diverse 'other services' sector.
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Table 5.1 Principal Business Activity Activity n % Business & Financial Services 11 7% Hotels and Restaurants 11 7% Retail/ Wholesale 35 23% Transport and Communications 6 4% Construction 7 5% Farming 20 13% Manufacturing 14 9% Other Services 19 13% Public Sector 27 18% Source: ECOTEC Business Survey
5.3.2 Description of business • Approaching one-half of all respondents indicated that they operated as sole traders or independently (45%); 1 in 4 (25%) were classified as private limited company.
Table 5.2 Business Description Description n % Charity/Voluntary or Community Organisation 8 5.3% Government organisation (education/healthcare) 12 7.9% Other 3 2.0% Partnership 13 8.6% Private Limited Company 38 25.0% Public Limited Company 9 5.9% Sole trader/ independent 69 45.4% Source: ECOTEC Business Survey
• In line with this size and sectoral profile, the vast majority of respondents – more than 4 in 5 (83%) businesses located in the Corridor indicated that they comprised single site operations.
• Amongst those organisations operating across multiple sites, the vast majority (73%) of other company sites were located elsewhere within Northern Ireland.
5.3.3 Length of time business has been in operation • The appreciable majority of businesses were long established, with approaching two- thirds (62%) of companies having been trading for a period of a decade of more. Less than 1 in 5 (15%) indicated that they had been trading for under five years.
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Table 5.3 Length of Time in Operation Length of time n % Less than 1 year 4 2.6% 1-5 years 19 12.5% 6-10 years 35 23.0% 11-20 years 29 19.1% 21-50 years 43 28.3% 50+ 22 14.5% Source: ECOTEC Business Survey
Less than 1 year 1-5 years 6-10 years 11-20 years 21-50 years 50+
• Similarly, a substantial majority - 3 in 5 (59%) – of businesses reported that they had been operating from their current site for a period of 10 years or more.
• When businesses were asked their primary reasons for locating in the Corridor, it is perhaps notable that a significant proportion – 1 in 3 (31%) – made reference to legacy factors or geographical inertia (born/ live here; family reasons; inherited) as major influences.
5.3.4 Size and geographical scope of operations • In part reflecting the sectoral profile of the Corridor's economy, the vast majority of businesses surveyed comprised micro-businesses (10 or fewer employees).
• Approaching one-half of businesses (43%) reported that approaching 100% of their workforce lived within a five mile radius of the site. Only a very small minority (5%) reported that more than 1 in 10 staff commuted more than 20 miles to the site – suggested comparatively localised labour market catchments within the Corridor area.
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Table 5.4 Geographical Spread of Workforce Between 5 and 10 Between 11 and 20 Over 20 miles from Within 5 miles miles from the site miles from the site the site % of workforce 0 to 10% 27 17.6% 95 62.5% 124 81.6% 137 90.1% 11-20% 5 3.3% 14 9.2% 1 0.7% 3 2.0% 21-30% 5 3.3% 10 6.6% 3 2.0% 1 0.7% 31-40% 2 1.3% 2 1.3% 2 1.3% 1 0.7% 41-50% 8 5.2% 8 5.3% 7 4.6% 2 1.3% 51-60% 3 2.0% 2 1.3% 0 0.0% 1 0.7% 61-70% 7 4.6% 2 1.3% 2 1.3% 0 0.0% 71-80% 19 12.4% 2 1.3% 2 1.3% 0 0.0% 81-90% 4 2.6% 0 0.0% 0 0.0% 0 0.0% 91-100% 65 42.5% 10 6.6% 4 2.6% 0 0.0% NR 8 5.2% 7 4.6% 7 4.6% 7 4.6% Source: ECOTEC Business Survey
• With regard to markets, over two-thirds (67%) of companies reported that the vast majority of their sales (80% +) were with customers/ clients in Northern Ireland. Given geographical proximity to the border, the Republic of Ireland accounted for much of the remainder. Survey findings would suggest comparatively little evidence of international (i.e. external to the British Isles) trading.
Table 5.5 Geographical Spread of Sales Northern Ireland % of Sales Republic of Ireland n % n % 0 to 10% 2 1.3% 107 70.4% 11-20% 2 1.3% 10 6.6% 21-30% 1 0.7% 6 3.9% 31-40% 5 3.3% 4 2.6% 41-50% 4 2.6% 2 1.3% 51-60% 4 2.6% 4 2.6% 61-70% 3 2.0% 0 0.0% 71-80% 13 8.6% 2 1.3% 81-90% 13 8.6% 1 0.7% 91-100% 89 58.6% 0 0.0% NR 16 10.5% 16 10.5% Source: ECOTEC Business Survey
• Further insight into the geographical scope of current market operations is provided by analysis of the location of major business competitors. Survey responses suggest that it is overwhelmingly the case that major competitors are either located 'locally' (i.e. elsewhere in the Corridor), or else in other parts of Northern Ireland.
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Figure 5.1 Location of Business Competitors
40%
35%
30%
25%
20%
15%
10%
5%
0%
K nd cal ere ne h nse o ther D rela Lo o N O I Ireland w p n very res her E No Nort
Source: ECOTEC Business Survey
• Similarly, and in relation to factor inputs, the vast majority of business expenditure is concentrated on suppliers located either in Northern Ireland, or else over the border in the Republic: 1 in 2 businesses indicate that they currently spend over 80% percent of their expenditure on inputs from suppliers based in Northern Ireland.
Table 5.6 Location of Suppliers % of expend iture Northern Ireland Republic of Ireland n % n % 0 to 10% 4 2.6% 93 61.2% 11-20% 3 2.0% 11 7.2% 21-30% 10 6.6% 5 3.3% 31-40% 1 0.7% 4 2.6% 41-50% 11 7.2% 8 5.3% 51-60% 3 2.0% 0 0.0% 61-70% 4 2.6% 0 0.0% 71-80% 17 11.2% 0 0.0% 81-90% 12 7.9% 0 0.0% 91- 100% 58 38.2% 2 1.3% NR 29 19.1% 29 19.1%
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Source: ECOTEC Business Survey
5.3.5 Business performance and outlook • Although a net balance of companies reported having experienced increases in sales turnover during the preceding five year period, it is also perhaps notable that approaching one-half of establishments also reported either stable or else declining levels of sales across this period. Overall, some 3 in 5 businesses also reported either stable or else declining levels of employment across this period.
Figure 5.2 Changes in Employment and Turnover (on-site)
50% 45% 40% 35% 30% Employment 25% Turnover 20% 15% 10% 5% 0% Growth Decline Stayed Don't Know Same
Source: ECOTEC Business Survey
• Looking to the future, business optimism would appear guarded in relation to forecast trading prospects, with only 1 in 2 (49%) businesses claiming that they expect to see turnover increase over the next five years.
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Table 5.7 Forecast Change in Employment and Turnover (on-site) Employment Turnover n % n % Grow 58 38.2% 74 48.7% Decline 14 9.2% 15 9.9% Stayed the same 61 40.1% 38 25.0% Don't know 19 12.5% 25 16.4% Source: ECOTEC Business Survey
5.4 Role of Transport and Importance of the A5
5.4.1 Primary mode of transport • 'Road' was overwhelmingly cited as the principal mode of transport by survey respondents – both in terms of transporting final goods or services to customers, and for suppliers transporting materials and intermediate inputs to respondents' businesses.
Table 5.8 Primary Model of Transport Mode of transport By your business for By suppliers in transporting transporting inputs to good/services to your business customers n % n % Road 147 96.7% 149 98.0% Air 0 0 1 0.7% None/Not Applicable 5 3.3% 0 0 Other 0 0 2 1.3% Source: ECOTEC Business Survey
5.4.2 Dependency on the A5 1 • Analysis of survey responses confirms the very considerable degree to which businesses located in the WTC are dependent on the A5 for a range of critical business purposes
• On average, the overwhelming share of business respondents stated that they were dependent on the A5 for no less than three of the following five functions: transport of supplies/ inputs, delivery of finished goods, business travel (client meetings etc), staff commuting, and leisure travel (including by visitors and tourists).
1 Multiple responses allowed
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Table 5.9 Business Dependency on the A5 Purpose n %
Business travel (client meetings, etc) 64 13.2%
Delivering supplies/goods 97 20.0%
Receiving supplies/goods 106 21.9%
Staff travelling to and from work 87 17.9%
Used by customers/visitors 108 22.3% Source: ECOTEC Business Survey N.B. Multiple responses permitted
5.4.3 Importance of the A5 to businesses • Reflecting the central role of the A5 to business operations and economic development in the Corridor, a substantial majority - 3 in 5 (59%) – of businesses regarded the A5 as either 'crucial' or else 'very important' to their operations.
Table 5.10 Overall Importance of the A5 to Business Operations Rating n % Crucial 49 32.2% Very important 40 26.3% Some importance 28 18.4% Not very important 23 15.1% Not at all important 11 7.2% DK 1 0.7% Source: ECOTEC Business Survey
5.4.4 Problems or constraints as a result of the present A5 • When respondents where asked to identify any problems or constraints which they thought might occur as a consequence of the current A5, substantial numbers (50%) referred to adverse impacts on business operations – typically expressed as 'loss of business', 'loss of man hours' or 'increased operating costs'. Further, a significant share of respondents (37%) also identified the unreliability of journey times as a key constraint.
• Significantly, an appreciable number of respondents also made comment clearly alluding to the perception of the current A5 as a dangerous road.
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Table 5.11 Identified Issues/ Constraints Resulting from Current A5 Problem/constraint n % Journey times are unpredictable 39 36.8% Loss of business (new contracts/visitor numbers/etc) 10 9.4% Loss of man hours 26 24.5% Increased operating costs 17 16.0% Recruitment difficulties 2 1.9% Other 12 11.3% Source: ECOTEC Business Survey
5.4.5 Predictions of change in traffic conditions on the A5 over the next 10 years • Looking to the future, there is a clear consensus amongst businesses that traffic conditions on the A5 are likely to deteriorate markedly over the next ten years.
• A substantial majority of respondents (61%) were of the view that traffic conditions on the A5 would become 'significantly worse', with a further 21% of the view that they would become 'worse'.
Table 5.12 Forecast Traffic Conditions on the A5 (in absence of further improvements) Change n % Better/improved 3 6.1% Little/no change 6 12.2% Worse 10 20.4% Significantly worse 30 61.2% Source: ECOTEC Business Survey
5.4.6 Impact on business operations of improvements to A5 1 • When businesses were asked to comment on the prospective impact on their business operations of improvements to the A5 in the Corridor (specifically, upgrading to dual carriageway between Londonderry and Aughnacloy), a substantial share of organisations felt they could identify a range of positive gains in respect of their business operations.
• The most commonly cited prospective future benefits included 'improved business performance' (35%), 'improved access to customers or suppliers' (29%), and 'greater access to labour/ employees'.
1 Multiple responses allowed
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Table 5.13 Likely Impacts Resulting From Further Improvements to the A5 Impact n % Improved access to customers/suppliers 29 29.3% Improved business performance 35 35.4% Greater access to labour/employees 16 16.2% Little/no change 5 5.1% Reinvestment/expansion at current site 8 8.1% Other 6 6.1% Source: ECOTEC Business Survey
5.5 A5 WTC: Stakeholder Views on Potential Economic and Regeneration Impacts
As a complement to the volume survey conducted with Corridor businesses, and as mechanism for further exploring and understanding key issues connected to the prospective impact of the A5 scheme, consultations were also held with a number of stakeholder organisations with a particular interest in the Corridor and its economic development potential. Once again, the focus was very much on establishing the nature of current barriers to development, together with anticipating the likely impacts of proposed A5 improvements on future economic prospects and potential for the Corridor and wider North West region. A full list of those consulted is included in the report Annex.
5.5.1 Balanced regional development Many of those consulted were clearly of the view that the A5 improvement scheme will play a central role in helping to realise a number of long-standing strategic policy objectives. Foremost among these relates to a general commitment from NI government (as enshrined in the RDS) for delivering balanced regional development within the province.
Certainly, the consensus view is that, to date, the North West has seen comparatively little by way of additional investment – public and private – when compared with many eastern parts of the province, most notably the greater Belfast metropolitan area. However, with issues now being raised over Belfast's continuing capacity to accommodate large-scale employment growth (supply-side constraints in terms of labour and skills, available sites and transport infrastructure), increasingly there is seen to be potential to affect a westward shift in the economic 'centre of gravity', with this serving to support the goal of promoting more balanced regional development. A new and upgraded A5 WTC would function as a key enabling infrastructure towards delivery of this objective.
In strategic terms, an upgraded A5 will form a north-south route to compliment the current east-west route linking Enniskillen with Belfast. ICBAN, which focuses on the central border region at a macro level, has identified the upgrade of the A4/N16 (E-W route) and
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A5/N2 as the two projects which are fundamental to the future economic development of the border area.
5.5.2 North West Gateway On a related point, the City of Londonderry has been identified as having a particularly critical role as key hub and regional capital of the North West region. Londonderry is the dominant commercial and administrative centre with a hinterland of up to 300,000 people, and spanning the political border between NI and the ROI. Within this context, an integrated approach to spatial and economic development is being advanced under the North West Gateway Initiative (NWGI), a cross-border partnership covering Londonderry, Limavady and Strabane, and Donegal
Stakeholders are firmly of the view that effective, modern transport infrastructure (road/air/port) is required in order to provide the access needed for Londonderry to effectively function in this hub role. As a strategic transport corridor, an upgraded A5, together with corresponding investments in improving port (Lisahally) and airport (City of Derry) facilities, is seen as essential in order for Londonderry to successfully fulfil this role as capital and hub of the wider North West Region and in allowing the city to expand its 'economic footprint'. It is asserted that the A5 will be a 'major part of the jigsaw' to developing the Letterkenny-Londonderry-Strabane City Region (NWGI), together with further promoting integration and cross-border links.
Reflecting in part an urban (agglomeration) bias of many knowledge economy sectors (including professional services) and the urban renaissance phenomenon which is making city working and living more attractive, it is anticipated that Londonderry will achieve significant growth over the coming years. An improved transport network to the rest of the Region (and cross-border) is regarded as a key enabler of such growth.
5.5.3 Inward investment and investor perceptions A number of those consulted drew attention to issues apparently rooted in negative investor perceptions of the North West, including of perceived peripherality and of poor accessibility potential. In particular, reliability of journey times had been highlighted as an important issue for many existing businesses as well as potential investors, and constituted a barrier to the attraction of inward investment. Addressing such perceptions therefore, could represent a key mechanism through which the new A5 could encourage or else enable higher levels of inward investment and re-investment.
Accessibility and the quality of transport infrastructure, it was noted, is often rated as one of the key considerations (along with labour supply and skills requirements) for relocating
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firms, often more important for example than land values. Prospective investors regularly commission transport studies to understand the regional and local transport context.
By way of example, consultees in Omagh reported that a lack of good transport infrastructure had been identified as an issue when Invest Northern Ireland had made efforts to attract FDI to the town. Investors need to be able to move goods and people and the lack of time certainty about journeys on the A5 was seen as reducing the attractiveness of Omagh as a location for investment. Prospective investors were able to base this view on their own experiences first hand of travelling to the town: getting stuck behind tractors for long stretches being commonly cited.
Certainly a critical issue relates to journey time reliability and network resilience. It was suggested that costs to businesses lay not only in delays experienced on the A5 day-to- day, but also in terms of poor reliability. The point was made that, currently, it is extremely difficult to predict the drive time between Londonderry and Dublin. An unwelcome by- product of journey time unpredictability means that many businesses have little alternative but to 'play safe' and factor in extra travel time for deliveries and business trips. The fact that the North West economy is so reliant on the A5 Corridor route serves to amplify the consequences of accidents, and recent events were highlighted by some consultees to illustrate (anecdotally) the consequences of poor network resilience.
5.5.4 Urban regeneration Consultees also highlighted a range of prospective regeneration effects which might be expected to accrue as a by-product of the new A5. In this respect, Ilex, the urban regeneration company for the Londonderry City Council area, places particular importance on investment in road infrastructure, together with measures to further develop the City of Derry Airport, as prerequisites to addressing outstanding issues of economic peripherality as well as a mechanism for redevelopment of major sites such as Fort George and Ebrington Barracks, seen as integral to the regeneration of the city.
Similarly, Omagh, a district which has been characterised by appreciable business and employment growth during the past few years, places considerable emphasis through its visioning framework in the role of an upgraded A5 as enabling infrastructure for further economic regeneration of the main urban area. Omagh is still heavily dependent on the public sector as a source of employment, and it is argued that upgrading the A5 would serve to expand local labour market catchments area as well as providing opportunities for opening up a number of major redevelopment sites in the vicinity (notably the Lisanelly and St Lucia military sites). Nevertheless, it should also be plain that under such circumstances considerations of final 'route line' selection and attendant 'junction strategy'
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will hold important implications for those seeking to maximise the scope of local area benefits (see below).
In summary, the A5 is widely seen as a principal 'economic enabler' for the North West region. Under the right conditions upgrading may be expected to provide connectivity benefits for all of the principal urban centres along the route. All have experienced some measure of recent growth, but the potential exists for substantially greater economic and development expansion. Upgrading might also be anticipated to benefit other settlements within the Corridor by supporting local regeneration efforts and improving access to employment for those living in deprived communities.
5.5.5 Tourism and visitor economy It is widely considered that there also exists substantial potential for tourist sector expansion, on account that upgrading the A5 will make the region's latent tourist attractions more accessible to a greater volume of visitors. There can be little doubt that tourism will be a major economic driver during the next decade, with cross-border marketing initiatives such as Destination North West and Glens and Lakelands seeking to enhance the regional profile and offer, including through linking of, 'signature' attractions.
Whilst tourism is rightly viewed as a key opportunity, it is important to appreciate that much will also depend on the successful realisation of a number of complementary initiatives, not least the further development of City of Derry airport as a major visitor gateway to the Region. Although many visitors to the Region travelling along the A5 Corridor can be anticipated to benefit from considerable time savings, arguably, such time savings might be seen as more modest within the context of some longer journeys. Nevertheless, a new A5, accompanied by complementary tourism strategy measures (including accommodation, marketing and branding etc.), can be expected to provide a substantial stimulus towards encouraging greater numbers of weekend trips/ overnight stays in the North West.
Over the border, tourism is a particularly notable component of Donegal's economy (worth an estimated €70m annually 1), and it is thought that given the right support and infrastructure investment (including the A5 upgrade), there exists very considerable future growth and employment potential. In this context Donegal represents a part of the ROI that historically missed out on considerable investment during the era of the Troubles on account of its geographical location and configuration – a pattern compounded by a lack of effective connectivity. Much of Donegal's commercial traffic typically heads eastwards,
1 Source: Failte Ireland (2005)
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with the majority of exports leaving via Larne and Belfast (rather than the ROI). Consequently, the A5 route is described as 'economically vital to County Donegal'.
5.5.6 Other potential benefits Stakeholders were able to identify a number of other potential benefits which might be expected to accrue – directly or indirectly - as a consequence of the A5 upgrade, including: commuting and labour supply, reliability of emergency/ health services, and road safety.
It was noted that accessibility is a factor which determined the attractiveness of areas for people as well as businesses. Improved road access would, it was suggested, help to attract and retain young working people – a highly mobile group which are recognised as key to economic success. Consultees commented that stable labour supply was an important contributory factor to business success and that an upgraded A5 could contribute to this aim, particularly with regard to Londonderry – after Belfast, the major economic centre in the province.
Comment was made to the effect that a positive spin-off from upgrading of the A5 route would relate to improved access to a range of local and regional services, notably hospitals and/ or emergency services - but also, potentially, retail, entertainment and leisure services. However, with regard to the latter, it was recognised that resulting impacts might well prove to be complex or otherwise unintended, with, for example, improved access acting to encourage a concentration of retail and consumer expenditure in major urban centres (Londonderry) and consequent leakage from local service areas.
The present A5 was unanimously considered to be a dangerous road, one on which there had been a number of high profile fatalities during recent years. Accidents are often judged to be rooted in risk taking behaviour brought about as a result of frustration at being held up by slow moving traffic. Much of the Corridor passes through rural areas with agricultural traffic impacts on traffic movement along the route, creating congestion and safety issues, much of which would be eased by upgrading to dual carriageway.
5.5.7 A5: caveats and dependencies In seeking to explore and better establish the nature of prospective economic and regeneration impacts accruing from an upgraded A5, stakeholders also identified a number of caveats or else drew attention to various dependencies associated with the scheme.
There was recognition – explicit or implicit - among some of those consulted that improved infrastructure can in some circumstances constitute a threat as well as an opportunity (the 'two-way road' debate) – for example, potentially allowing expenditure and investment to
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bypass towns along the route. The fact that a key objective of the route will relate to the facilitation of strategic movement between Londonderry and Dublin, and that consequently much of the future traffic using the A5 will in effect be through traffic, could serve to highlight possible grounds for tension between 'strategic' development objectives on the one hand and 'local' development objectives on the other. However, the consensus view was that in the case of the A5 Corridor local and strategic objectives overlapped to an extent whereby such tensions were not likely to be significant issue. Settlements such as Omagh and Strabane were judged to be of sufficient size and economic scale to counter any potential displacement effects and to otherwise constitute net beneficiaries.
Given this context it should nevertheless be sufficiently plain that decisions regarding the final routing and alignment path of the scheme will be highly significant. There is an understandable concern amongst local partners for ensuring proper connectivity between the planned A5 dual carriageway and the main urban centres (such as Strabane and Omagh) within the Corridor. Unless there is planned integrated approach taken in terms of ensuring effective road linkage between the new dual carriageway and the town centres then there is a fear that many of the potential economic and regeneration benefits will not be properly realised. Furthermore, stakeholders expressed a clear view that the route needed to be upgraded in full, suggesting that a piecemeal approach will not achieve the desired 'step change' in respect of economic opportunity and impact.
It can be expected that the North West region will see considerable growth and economic expansion in the future, with the scale of regeneration activity and the extent of development land offering substantial potential in response to planned improvements in accessibility. However, the implications for economic development and regeneration afforded by the A5 upgrade will be dependant to a significant degree on the detail of the intervention, particularly relating to route alignment, junction strategy, and access to specific development sites or areas of employment.
5.6 Strategic Summary: Views of Business and Stakeholders
• Analysis of survey responses confirms the very considerable degree to which businesses located in the WTC are dependent on the A5 for a range of critical business functions: transport of supplies/ inputs, delivery of finished goods, business travel (client meetings etc), staff commuting, and leisure travel (including by visitors and tourists).
• A substantial majority - 3 in 5 (59%) – of businesses regarded the A5 as either 'crucial' or else 'very important' to their operations. Constraints cited as a consequence of the current A5 included 'loss of business', 'loss of man hours' or 'increased operating costs',
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with a significant share of respondents also identified the unreliability of journey times as a key constraint.
• Looking to the future, there is a clear consensus amongst businesses that traffic conditions on the A5 are likely to deteriorate markedly over the next ten years, with the vast majority of respondents – more than 4 in 5 - of the view that traffic conditions on the A5 would become either 'significantly worse' or 'worse'.
• Stakeholders consulted were clearly of the view that the A5 improvement scheme will play a central role in helping to realise a number of long-standing strategic policy objectives, most particularly in delivering balanced regional development within the province.
• The City of Londonderry has been identified as having a particularly critical role as key hub and regional capital of the North West region. As a strategic transport corridor, an upgraded A5, together with corresponding investments in improving port (Lisahally) and airport (City of Derry) facilities, is seen as essential in order for Londonderry to successfully fulfil this role as capital and hub of the wider North West Region, together with further promoting integration and cross-border links.
• Consultees drew attention to issues rooted in negative investor perceptions of the North West, including of perceived peripherality and of poor accessibility potential. In particular, reliability of journey times had been highlighted as a key issue for both existing and potential investors and therefore a barrier to the attraction of future inward investment/ re-investment.
• An unwelcome by-product of journey time unpredictability means that many businesses have little alternative but to 'play safe' and factor in extra travel time for business trips and deliveries. The fact that the North West economy is so reliant on the A5 Corridor route also serves to amplify the consequences of accidents.
• Under the right conditions upgrading may be expected to provide connectivity benefits for principal urban centres along the route, including by supporting local regeneration efforts and improving access to employment for those living in deprived communities.
• It is widely considered that there also exists substantial potential for tourist sector expansion, on account that upgrading the A5 will make the region's latent tourist attractions more accessible to a greater volume of visitors, though much will also
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depend on the successfully realisation of complementary initiatives, including further development of City of Derry airport as a major visitor gateway to the Region.
• Stakeholders also identified a number of other potential benefits which might be expected to accrue – directly or indirectly - as a consequence of the A5 upgrade, including, in relation commuting and labour supply, reliability of emergency/ health services, and road safety improvements.
• Importantly, in seeking to explore and better establish the nature of prospective economic and regeneration impacts accruing from an upgraded A5, stakeholders identified a number of caveats or else drew attention to various dependencies associated with the scheme.
• The implications for economic development and regeneration afforded by the A5 upgrade will be dependant to a significant degree on the detail of the intervention, particularly relating to route alignment, junction strategy, and access to specific development sites or areas of employment.
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6.0 A5 WTC: Analytical and Modelling Results
6.1 Introduction
In this section we set out our methodological approaches to the calculation of the wider impacts associated with the A5 transport scheme and present headline results based on our analytical and modelling work. Traditionally, the assessment of transport interventions has been limited to the quantification of direct welfare benefits to the consumer (business travellers/ commuters/ leisure travellers) in terms of time savings, cost savings and improved safety. Whilst such elements are clearly fundamental, an appraisal of a proposed transport intervention is incomplete without reference to wider impacts (WI). Wider impacts relate in particular to GDP effects, with such impacts not being readily captured through conventional transport appraisals.
6.2 Wider Impacts: Revisiting the Literature
The SACTRA committee report highlighted the potential relevance of economic effects beyond direct user benefits in the existence of 'imperfect competition', with the report noting that where market imperfections exist 'analysis demonstrates that the value of initial transport impacts will not be the same as the value of the final 'economic' impacts’. In reality, economies suffer from imperfections which determine that the prices charged for goods and services do not equal the real economic value of the resources used.
The Eddington Study further analysed the issue of transport appraisal and the potential significance of wider effects. Although conventional economic appraisal remains central to the decision process, the study noted the importance of better understanding the extent of any wider impacts:
'…it is clear that traditional appraisal through time savings misses some important benefits of transport investment. In particular, policy to date has not fully appreciated the contribution of reliability of journey times, highly productive agglomerations, or transport’s importance in facilitating extensive labour catchment areas in such places. There must be continued support for quantification of these impacts through modified transport appraisal.'
Critically, the Eddington Study identifies the potential role of transport in driving agglomeration effects. Such agglomerations comprise clusters or spatial concentrations of economic activity which formulate on account of the productivity benefits firms derive from
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locating in close proximity to other firms, markets and specialist supplies of labour. The study notes three 'economies of agglomeration' :
• better matching of people to jobs and access to skilled labour; • connection to suppliers and markets; and • information spillovers between firms.
The study highlights the potential role for transport in developing and enhancing agglomeration effects by reducing travel time and costs and effectively bringing firms, workers and consumers closer together. The contribution that transport can make to productivity is dependent to a considerable extent on the characteristics of particular industries, and how productive these are, as well as the existing density of the area.
In summary, the Eddington Study estimates that additional GDP benefits from agglomeration could range from 10-30% over and above direct time savings in urban areas in the UK. 6.2.1 Department for Transport - Transport Analysis Guidance (TAG) In recognition of the findings of the SACTRA report (1999), and subsequently the Eddington Study (2006), the Department for Transport published a technical paper in 2006 setting out a methodology and evidence to estimate (a) wider impacts missing from current appraisals and (b) the impact of transport schemes on GDP. Notably, in April 2009 the guidance on how to estimate Wider Impacts and Regeneration Impacts associated with transport schemes was, with some revisions and additions to the previous technical paper, incorporated in the Transport Analysis Guidance (TAG) for consultation (TAG Unit 2.8 and 3.5.14).
Wider Impacts and Regeneration TAG Unit 2.8 explains, in general terms, the form of appraisal required for the Wider Impacts and Regeneration. Specifically, it explains that in the presence of imperfect markets, wider impacts are not estimated as part of transport user benefits and must therefore be estimated separately. The Wider Impacts Sub- objective TAG Unit 3.5.14 then provides detailed guidance on how to appraise the wider impacts. The appraisal framework is based around the following three impacts:
• agglomeration; • increased or decreased output in imperfectly competitive markets; • labour market impacts (more/ less people working and the move to more/ less productive jobs).
Each of the above impacts are described by the DfT as follows:
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Table 6.1 Wider Impacts Agglomeration Impacts
The term agglomeration refers to the concentration of economic activity in an area. Transport can act to increase the accessibility of an area to a greater number of firms and workers, thereby impacting on the level of agglomeration. Empirical evidence demonstrates that the level of agglomeration affects the productivity of firms and workers in an area, even after controlling for characteristics specific to firms and workers in that area. Agglomeration has an impact on UK welfare through its impact on productivity and UK Gross Domestic Product (GDP). Higher UK GDP would provide a means to allow for higher UK consumption, thereby impacting on ‘welfare’ or ‘wellbeing’.
Output change in imperfectly competitive markets
In most cases, markets are not ‘perfectly competitive’ and this can lead to lower production and higher prices than would exist in the case of a competitive market, normally to the detriment of consumers and the economy as a whole. A reduction in transport costs (to business and/ or freight) allows for an increase in production or output in the goods or service markets that use transport. Better transport provision may result in less congestion and hence enable a firm to carry out more deliveries in a day (i.e. increase output). A transport intervention that leads to an expansion of output will deliver a welfare gain as consumers of the goods and services will value any increases in production by more than the cost of the additional units of production. This constitutes a welfare gain not appraised within other user benefits.
Labour market impacts
Labour supply impacts: Transport costs are likely to affect the overall costs and benefits to an individual from working. In deciding whether or not to work, an individual will weigh travel costs against the wage rate of the job travelled to. A change in transport costs is therefore likely to affect the incentives of individuals to work and hence the overall level of labour supplied in the economy. The extent to which potential workers are employed in our economy affects the level of UK GDP. The more we can make efficient use of our ‘human resource’, the more output the UK can potentially produce. Higher UK GDP provides a means to allow for higher UK consumption, again therefore impacting on ‘welfare’ or ‘wellbeing’. The level of labour supply can impact on welfare not just through GDP but also through benefits and disbenefits to individuals depending upon whether they like or dislike working. However, these (non-GDP) benefits are already captured via appraisal of commuter user benefits.
Move to more or less productive jobs: Transport can affect the incentives for firms and workers to locate and work in different locations. Employment growth or decline in different areas is likely to have implications for productivity, as workers are often more or less productive in different locations. This may have implications for UK productivity which, in turn, will impact on UK welfare. The extent to which workers are employed in their most productive uses in high productivity jobs affects the level of UK GDP. By impacting on the overall productivity of jobs across the economy, transport has the potential to affect UK GDP and in turn ‘welfare’ or ‘wellbeing’.
6.2.2 Evidence from previous studies The assessment of wider impacts of transport intervention remains in a relatively early stage of development. However, a number of recently completed studies in the UK have started to provide an indication of the scale and scope of estimated wider impacts.
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Notably, the magnitude of wider impacts identified differs significantly according to the particulars of the interventions and economic context under scrutiny, but also the precise methodology employed for assessment.
Research into the wider impacts of transport interventions was commissioned by the DfT in 2006 to inform the Eddington Study. Employing a land use/ transport interaction (LUTI) model (the South and West Yorkshire Strategic Model), the report notes that schemes involving investment in transport provision, that reduce the generalised cost for travellers '…generally experience an increase of between 30% and 50% in welfare benefits as a result of the inclusion of Wider Economic Benefits'1.
Another study which also provided input into Eddington Study assessed the potential economic effects of the conversion of the M6 to a 4-lane highway between junctions 4 and 10 around Birmingham. In the absence of a LUTI model, this research employed the PRISM model and reported the wider economic impact of the M6 expansion at approximately 17% of the overall travel time benefits estimated through the conventional economic appraisal – including agglomeration benefits of 10% of total user benefits. Interestingly, the study found employment relocation effects to be slightly negative, a result of a shift in trip-ends from the high productivity metropolitan areas to the less productive surrounding areas in the West Midlands.
Crossrail provides an interesting case study of a non-road wider impacts assessment, and in an area characterised by relatively high productivity and potential for significant agglomeration effects. Perhaps unsurprisingly, the assessment of Crossrail estimated substantial wider impacts: indeed, GDP effects of more than £15bn over the 60 year appraisal period.
Most recently, wider impacts assessments have also been undertaken, in turn, for proposed improvements on the A11 in the East of England and the M4 in South Wales. The A11 study estimated wider impacts of £136 million over the 60 year appraisal period, adding some 25% to the welfare benefits captured from time savings alone. In South Wales, the proposed improvements on the M4 were found to generate wider impacts of approaching £700 million over the 60 year appraisal period, adding approximately one- third to welfare benefits captured from time savings alone.
Table 6.1 Wider Impacts Assessments - Welfare Impacts (60 year appraisal, £m) Impact Cross Rail M6 A11 M4 Conventional Scheme 12,832.0 1,117.4 557.5 2,100.0 Benefits
1 Wider Economic Impacts of Transport Interventions, (2006), prepared by MVA for the Department of Transport
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Impact Cross Rail M6 A11 M4 Agglomeration 3,094.0 124.0 100.7 531.6 Output change in imperfectly 485.0 61.3 35.5 157.8 competitive markets Labour market impacts 3,580.0 -0.4 0.2 1 5.7 Total WIs (Welfare) 7,159.0 184.9 136.8 695.0 WIs as % of Conventional 55.8% 17.0% 24.5% 33.1% Benefits
Table 6.1 provides a summary of results taken from previous studies. Welfare effects relate to the gains and losses that people experience, for example, based on the value of time 2. The table illustrates differences in the magnitude of estimates for each of the wider impact elements across the separate studies, and when viewed as a proportion of conventional benefits. To a large extent these are a reflection of the specifics of individual interventions together with differences in economic context.
Wider impacts are considerably larger for Crossrail at over 50% of conventional assessed benefits. Given the central London context, agglomeration effects are pronounced, as indeed are labour supply effects: a consequence of the expected relocation of employment to the centre of London. In the case of the A11, M6 and M4 assessments, agglomeration effects are by far the most significant WI element, with labour supply effects being very small or even negative.
6.3 Wider Impacts: A5 WTC (DfT Approach)
In accordance with DfT's Transport Appraisal Guidance (TAG), in this section we provide an assessment of wider impacts associated with the proposed A5 scheme. The WI assessment has been carried out on the basis of outputs from Mouchel's transport model, reflecting the Green/ Black/ Black Route option.
As part of the WI assessment, the transport model outputs (including hours and kilometres travelled) have been converted into a set of monetary values (generalised costs) using value of time estimates for different types of users, including commuters and business travellers (see Annex 4 for more detail). The spatial zoning system employed for the
1 Approximation based on GDP effect. 2 The welfare effects are different to GDP effects, which relate to financial effects only.
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purposes of the assessment comprises of the A5 Western Transport Corridor and principal adjacent areas in the Republic of Ireland 1.
Whilst the guidance requires the use of a multimodal transport model, the model used for this analysis is a highways model and only covers passenger and goods vehicles. Generally, if all relevant 2 modes are not incorporated into the assessment, then this is likely to result in errors in the estimation of Wider Impacts. However, in this case, the omission of some modes is not likely to result in significant errors, as the use of other modes, particularly rail, is fairly limited in the study area.
It has also been necessary to estimate the average generalised cost of travel between some origin/ destination (OD) pairs not recorded by the transport model. Moreover, to the extent that the transport model applied is not able to capture all trips between and within the areas used in the analysis (in particular, intra-zonal trips) it has also been necessary to discount the change in generalised costs on the basis of census data (travel to work) and reasoned assumptions.
6.3.1 Agglomeration Agglomeration impacts relate to the productivity benefits of increased proximity to other firms and centres of economic activity. The DfT approach focuses on changes in the 'effective density of employment' or employment density . Employment density is a measure of access to employment adjusted for travel times between and within the modelled zones. In turn, the productivity effects of changes in employment density depend on productivity elasticities, estimated using recent research endorsed by the DfT 3. Notably, the productivity effects of changing employment density reflect the importance of agglomeration for different industrial sectors.
Change in Employment Density
Changes in employment density are based on the average cost of travel within and between zones for a 'do minimum' and a 'do something' scenario. Table 6.2 below shows the calculated net percentage change in density for the study areas (as of 2029) following implementation of proposed improvements to the A5 4.
1 The A5 Western Transport Corridor comprises Londonderry, Strabane, Omagh and Dungannon, whilst the principal adjacent areas in ROI comprise Donegal and Monaghan. 2 For the purpose of WIs analysis, 'relevant modes' refers to all modes that are utilised in the modelled area in the base case as well as all modes that are affected by the intervention itself. 3 Wider economic benefits of transport improvements: link between agglomeration and productivity (Stage 1 report) (2005) Imperial College London, Dr D. J. Graham 4 It should be noted that estimates of transport costs have been applied where trips are 'unobserved' by the transport model.
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Table 6.2 Change in Employment Density, 2029 ∆ employment density
Londonderry 1.44%
Strabane 1.03%
Omagh 1.29%
Dungannon 0.46%
Donegal 0.38%
Monaghan 0.10% Source: ECOTEC analysis; based on transport model and employment data
• The most significant change in employment density can be expected to accrue in Londonderry and Omagh, followed by Strabane, reflecting the relative importance of the road to users in these areas.
• The change in employment density in the Republic of Ireland districts, particularly Monaghan, is relatively small.
Productivity Elasticity
The elasticity of productivity with respect to agglomeration (or employment density) used in the analysis (as shown in Table 6.3 below) has been derived from recent (DfT endorsed) research undertaken by Imperial College London 1. The difference between Northern Ireland's productivity elasticity and that of England can largely be explained in terms of sectoral characteristics and profile, and hence the weights attached to the sectoral productivity elasticities 2. Table 6.3 Productivity Elasticity with respect to Agglomeration Area Productivity Elasticities Northern Ireland and Republic of Ireland 0.037 England 0.043 Source: ECOTEC analysis, based on Census of Employment (2005) and Graham (2005)
1 Wider economic benefits of transport improvements: link between agglomeration and productivity (Stage 1 report) (2005) Imperial College London, Dr D. J. Graham 2 It has not been possible to derive productivity elasticities for the individual study areas used in the analysis on account of limitations in sub-national employment data at a detailed sector level (2-4 digit SIC codes). The estimate presented above has been derived using detailed sectoral employment data for Northern Ireland from the Annual Business Inquiry.
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GDP Impact of Agglomeration
The GDP effect of agglomeration of a given change in employment density is determined by the responsiveness of productivity to changes in effective density (productivity elasticities), the employment level and the average labour productivity (GDP per worker) in the area affected. Notably, the productivity elasticities are dependent on the industrial composition of the affected area, with some industries being considerably more responsive to agglomeration than others.
Anticipated GDP (and welfare) effects of agglomeration in connection with the proposed A5 scheme are summarised in Table 6.4 below for the years 2014 and 2029.
Table 6.4 GDP (and Welfare) Effects of Agglomeration, 2002 prices ∆ GDP per worker (relative) ∆ GDP (absolute)
Area 2014 2029 2014 2029
Londonderry £21.3 £24.6 £886,126 £1,133,132
Strabane £12.8 £15.8 £190,418 £257,248
Omagh £15.8 £22.5 £370,152 £584,998
Dungannon £6.7 £8.0 £187,872 £287,538
Donegal £4.8 £6.7 £281,297 £419,823
Monaghan £1.1 £1.8 £29,461 £50,940
Total n/a n/a £1,945,326 £2,733,680 Source: ECOTEC analysis
• Largely reflecting changes in employment density, relative GDP (and welfare) effects connected to the A5 scheme are expected to be most significant in Londonderry, together with Strabane and Omagh. Notably, all areas show positive productivity effects of the intervention.
• Applying the relative change in productivity (per worker) to the total level of employment in each area produces the total GDP (and welfare) impacts of agglomeration. In summary, agglomeration impacts might be expected to increase overall GDP by approaching £2.7 million, as of 2029 1.
1 In accordance with the TAG, freight journeys have not been included in the above assessment. Freight journeys can only be included as a sensitivity test for the estimation of Wider Impacts. With regards to the A5 scheme the inclusion of freight journeys would serve to reduce the agglomeration effect.
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• On a spatial basis, the largest impact in absolute terms can be expected to be in Londonderry and Omagh.
The calculation of agglomeration impacts explicitly reflects forecast growth in employment on the basis of recent projection from the Trip End Model Presentation Program (TEMPRO) model (see Annex 4 for more detail).
6.3.2 Change in Output in Imperfectly Competitive Markets This wider impact reflects prospective increases in output resulting from reduced transport costs for businesses in an imperfectly competitive market. The calculation of this wider impact remains somewhat arbitrary, with the DfT simply recommending that an up-rate factor of 0.1 is applied to the business cost savings from the conventional economic appraisal. In other words, the change in output is estimated to be 10% of conventional business time saving benefits (incorporating time savings, fuel VOC and non-fuel VOC). On the basis of this, the change in output has been estimated at £38.6 million (NPV) for the 60 year appraisal period 1.
6.3.3 Labour Market Impacts This component of wider impacts is divided into two constituent parts: more or less people choosing to work; and move to more or less productive jobs.
More or Less People Choosing to Work
This wider impact relates to an increase in labour supply due to changes to effective wages. More specifically, the increase in the labour supply is a function of the change in generalised costs for commuting within and between zones as a proportion of the expected wages for new workers, which in turn is applied to the elasticity of labour supply (El) with respect to changes in commuting costs. The elasticity of labour supply is taken to be 0.1 as recommended by the DfT guidance. The estimated increase in the labour supply (number of additional workers) is then combined with the expected GDP of new workers to estimate the total GDP effect.
Commuting Cost Changes
The net percentage change in the average generalised cost of travel for commuters in 2029 are given in Table 6.5 below by way of illustrating the effect of the intervention on commuting costs.
1 As noted above, freight journeys have not been included in the above assessment in accordance with the TAG. However, in contrast to the agglomeration effect, the inclusion of freight journeys would serve to increase the change in output for this wider impact.
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Table 6.5 Net Percentage Changes in Cost of Commuting (2029): Do Something vs. Do Minimum
Londonderry Strabane Omagh Dungannon Donegal Monaghan
Londonderry 0.1% -0.6% -2.3% -1.4% 0.0% -0.7%
Strabane -1.3% -0.5% -1.5% -2.0% -0.1% -0.5%
Omagh -6.8% -1.8% -0.6% -0.3% -0.4% -0.3%
Dungannon -0.8% -1.4% -0.9% 0.0% -0.2% -0.1%
Donegal 0.0% -0.1% -0.3% -0.3% 0.0% -0.2%
Monaghan -0.6% -0.4% -0.2% 0.0% -0.2% 0.0% Source: ECOTEC analysis based on transport model outputs and the 2001 Census
• Notably, the cost of commuting is expected to fall most dramatically between Omagh and Londonderry (-6.8%).
• Generally, workers residing in the Londonderry, Strabane and Omagh can be expected to benefit the most in terms of commuting costs from the proposed improvements on the A5.
Expected Wages of New Workers
Importantly, the wage received by new workers may be significantly different to the wage received by the existing workforce. On the basis of the transport appraisal guidance, the parameter used to convert median gross wages to that of workers on the margins of the labour market is 0.69. Expected wages are summarised in Table 6.6 below.
Table 6.6 Annual median gross wages of marginal workers entering the labour market, 2008 (2002 prices)
Londonderry Strabane Omagh Dungannon Donegal Monaghan
Median gross wage £14,215 £15,718 £14,160 £13,463 £16,812 £16,812 Source: ECOTEC analysis based on ASHE data
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GDP Impacts of More People Working
The resultant GDP effects for each area as of 2029 are summarised in Table 6.7:
Table 6.7 GDP Impacts of More People Working in 2029 (workplace), 2002 prices Areas GDP Londonderry £3,751
Strabane £22,814
Omagh £27,507
Dungannon £2,408
Donegal £64
Monaghan -
Total £56,545 Source: ECOTEC analysis
• Notably, the most significant impact in terms of labour supply can be expected to accrue in Omagh and Strabane. Significant GDP effects can also be expected in Londonderry.
• The limited scale of this wider impact would tend to reflect the findings of a number of other recent WI assessments of comparable schemes.
Welfare Impacts of More People Working
The welfare impact of more people working is estimated as the tax wedge from the GDP impact estimated above. The tax wedge reflects income tax, national insurance contributions and corporation tax and is estimated to be 40%. The total welfare impact of more people working is therefore estimated at £22,618 (2002 prices) as of 2029.
Move to More or Less Productive Jobs
Transport interventions also have the potential to impact on business location. Where employment shifts from low productivity areas to high productivity area there will be a positive GDP impact. Similarly, there will be a negative impact on GDP if employment is relocated from a high productivity area to a low productivity area. The relocation of jobs is far from straightforward to quantify and would require a model that directly measures how transport impacts on land use (i.e. land use/ transport interaction (LUTI) models). However, many of these models are still in fairly early stages of development and tend to cover limited geographical areas.
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For this reason, the assessment of the move to more or less productive jobs is not a core requirement of the WI assessment. Notably, on the basis of previous wider impact studies, it might be expected that the GDP and welfare impacts from business relocations would likely be comparatively minor (or even negative) in nature.
6.3.4 Summary Impacts – Total The estimated GDP effects of the proposed A5 scheme are summarised below.
Table 6.8 A5 WTC - Wider Impacts (GDP Effects), 2002 prices Benefits 2014 2029 Agglomeration £1,945,326 £2,733,680
Output change in imperfectly n/a* n/a* competitive markets Labour market impacts £37,897 £56,545
Total Wider Impacts £1,983,223 £2,790,225 Source: ECOTEC analysis; *Data on conventional business time savings has not been made available for individual years and thus cannot be included in the above table.
The total wider impacts measured as GDP are estimated to be £2 million in 2014, rising to £2.8 million in 2029. The GDP effect of agglomeration economies may be expected to account for the overwhelming share of anticipated total wider impacts.
6.4 Wider Impacts: A5 WTC (REMI approach)
By way of complementary analysis, in this section we provide further assessment of the economic impact of the A5 scheme through application of a custom regional economic model, the REMI-ECOTEC Model. The Model is particularly well suited to transportation projects on account of the explicit inclusion of key economic geography theory components within the modelling framework. More specifically, economic geography components are represented through the REMI-ECOTEC Model's transportation cost matrices; and the labour access and commodity access indices (Figure 6.1).
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Figure 6.1 REMI-ECOTEC Model – Economic Geography Elements
Economic Geography Linkages
Commuter costs Transport costs Accessibility costs
Labour access Commodity access
Economic migration Real wages Intermediate input productivity
Composite prices Intermediate demand
Labour productivity Production costs Consumption
Domestic market share International market share
Employment Output
Transportation Cost Matrix
Describes the amount of cost savings in transporting goods and services due to an increase in transportation efficiency. Decreases in transportation costs lower the delivered price of products, which are computed as the sum of the commodity's cost at its origin and the distance-related cost of transferring the commodity to its destination. This price measure is calculated relative to delivered prices in all other regions, and weights the delivered price from all locations that deliver to the home region. The price changes subsequently translate into lower input costs for producers and into benefits for consumers.
Commuter Cost Matrix
Describes the amount of commuter time savings within or between modelled regions over the average workday. Reduced commuting times are assumed to improve labour productivity, since firms can access more suitable employees from a widened labour pool, while individuals may find jobs that are a better match for their specific attributes. For example, a surgeon may specialise in heart, brain, or knee surgery. Although a brain surgeon may be able to perform a heart operation, the brain surgeon is likely to be less effective than a surgeon who has specific experience with heart surgery. More broadly, locations that can be easily reached by a large number of potential employees can better match jobs with workers. Notably, the impact on productivity will be determined by the occupational and industrial structure of an area. Indeed, the matching of workers in specialist/ highly skilled roles is more important than for low skilled jobs.
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The change in productivity will subsequently feed through into reduced production costs, while also influencing economic migration by altering wage rates 1.
Accessibility Cost Matrix
Describes access to more diverse consumer goods and services by households, as well as access to a broader array of intermediate inputs by employers. Improved accessibility costs diminish production costs due to improved access to well suited factor inputs, and also indirectly influences the location decisions of households via economic migration.
Labour Access Index
Captures the favourable effect on labour productivity and thus labour costs when local firms have access to a wide variety of potential employees and are able to select employees whose skills best suit their needs.
Commodity Access Index
Predicts how productivity will be enhanced and costs reduced when firms increase access to intermediate inputs. This index is also used in the migration equation to incorporate the beneficial effect for consumers of having more access to consumer goods, which is factored into their migration decisions.
Critically, through the transportation cost matrices, the REMI-ECOTEC Model is able to translate traffic flow output data from transport models into economic effects. In particular, the REMI-ECOTEC Model allows for the estimation of effects arising from changes in commuting and transportation costs using the concept of 'effective distance', which is the mechanism through which the theory of economic geography enters the decision-making processes of economic agents in the model. In other words, the model allows for the adjustment of effective distance between two centres of economic activity, based on the efficiency of multi-modal transportation between them (i.e. generalised cost of travel). Hence, investment in a specified transport scheme may be expected to reduce the 'effective distance' between two locations and, consequently, increase their interaction, in terms of the flows of labour and commodities. In general, as the 'effective distance' increases, the costs that deter economic activity rise through an exponential process called 'distance decay'. The rate of change by economic sector of the distance decay curve (known as the distance decay parameter, ß) captures both the increased deterrence and the variable impact on flows by sector.
On the basis of a range of publicly available economic and demographic data the REMI- ECOTEC Model has been custom calibrated to closely reflect the particular economic
1 Note that the number of employees needed per unit of output depends on the use of other factors of production as well as labour access issues. Labour intensity, which measures the use of labour relative to other factors, is determined by the cost of labour relative to the cost of capital and fuel. The substitution between labour, capital, and fuel is based on a Cobb-Douglas production function, which implies constant factor shares.
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characteristics and conditions of the A5 Corridor, together with the Rest of Northern Ireland 1.
As with the wider impacts assessment undertaken using the TAG, the input data utilised for this analysis (i.e. changes in the generalised cost of travel) has been derived from Mouchel's transport model. The generalised cost estimates, for commuters and firms have in turn been directly input into the REMI-ECOTEC Model using the model's transportation matrices, allowing capture of fuller effects on businesses, commuter behaviour and the competitiveness of firms (industries). As with the previous analysis, the transport model data has been discounted to reflect the fact that the transport model does not account for all trips between and within the modelled zones.
6.4.1 REMI Results The results of the REMI-ECOTEC economic modelling focus on two headline measures – employment 2 and GDP – and represent the net impact of the proposed improvements on the A5 relative to a 'do minimum' scenario. The results should be interpreted as indicative of the scale and magnitude of expected impacts accruing as a consequence of the proposed A5 scheme.
Table 6.9 A5: Summary Employment Impacts (number of jobs) 2014 2029
Londonderry & Strabane 250.1 251.5
Omagh & Dungannon 51.5 61.7
Rest of Northern Ireland -56.6 -50.8
Total Northern Ireland 245.0 262.5 Source: REMI-ECOTEC Model N.B. Due to rounding individual estimates may not add up to the total.
Table 6.10 A5: Summary GDP Impacts (£ million), 2002 prices 2014 2029
Londonderry & Strabane 10.7 15.2
Omagh & Dungannon 2.3 3.7
Rest of Northern Ireland -1.8 -1.0
Total Northern Ireland 11.1 17.8 Source: REMI-ECOTEC Model
1 The REMI-ECOTEC Model has been custom calibrated for the following geographical areas: Londonderry and Strabane, Omagh and Dungannon, and Rest of Northern Ireland. 2 Employment refers to total jobs, and includes both part time and full time employment.
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N.B. Due to rounding individual estimates may not add up to the total.
• Employment and GDP diverge from the 'do minimum' scenario as of 2014, the year in which the new A5 is expected to become fully operational.
• By 2029, the net impact of an improved A5 on the Northern Ireland economy is estimated at some 260 additional jobs and an extra GDP contribution of approaching £18 million.
• The vast majority of the additional employment and GDP impacts may be expected to be concentrated in Londonderry and Strabane, with Omagh also likely to be a significant beneficiary area.
• Notably, the rest of Northern Ireland may be expected to record negative employment and GDP effects, primarily as a result of price competition effects (see below).
Broadly, the impacts are a result of two key economic effects. First, a productivity effect – changes in costs of transport make firms in each sector more or less productive. Higher productivity is equivalent to higher value added and/ or increased GDP. Second, a price competition effect – changes in transport costs affect the relative delivered price of goods and services between areas. For instance, lower costs of transport lead to lower production costs and prices, consumers and firms react to lower prices by purchasing more from the low cost area at the expense of higher cost areas. The net effect is dependent on the nature and scale of cost changes, responsiveness to changes in price (price elasticity) and the linkages between different areas in the model. These factors are determined separately for each of the 53 sectors in the model. In general, productivity effects take longer to accrue and translate into output and employment effects, with price competition effects tending to be more immediate and short term in nature.
6.5 Wider Impacts: A5 WTC Summary Results
The above sections have presented the net impact of the proposed improvements on the A5 for individual years. In Table 6.11 below we present the results of the economic analysis and modelling as net present values (NPVs) over a 60 year appraisal period.
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Table 6.11 Summary of GDP and Welfare Impacts (60 year appraisal period), 2002 prices (£m) NPV (£) NPV (£) GDP Welfare
User Benefits – Business 564.8 564.8
User Benefits – Consumers - 268.6
Total Transport User Benefits – conventional appraisal 564.8 833.5
Agglomeration 103.1 103.1
Output change in imperfectly competitive markets 38.6 38.6
Labour market impacts 1.4 0.6
Total Wider Impacts (TAG) 143.1 142.2
WIs as % of Conventional Benefits 25.3% 17.1%
REMI-ECOTEC Model 513.2 n/a Source: ECOTEC analysis
• The A5 scheme may be expected to yield a net present value of more than £140 million in relation to the wider impacts (GDP). The GDP effect of agglomeration economies is likely to account for the overwhelming share of anticipated total wider impacts.
• The results of the REMI-ECOTEC economic modelling show a net present value in excess of £500 million 1.
• Importantly, the results from the REMI-ECOTEC Model and the TAG approach are not directly comparable on account of the fact that the REMI-ECOTEC Model results also include the conventional business time savings and only covers Northern Ireland . (A fuller comparison and interpretation of the two approaches is provided below).
6.5.1 Wider Impacts: TAG vs. REMI-ECOTEC Model Whilst the DfT approach and the REMI-ECOTEC Model are ultimately built on the same conceptual and theoretical foundations, the two approaches produce, on the face of it, quite different results. At the most fundamental level, the apparent disparities between the two approaches can be explained by the fact that the REMI results also include the conventional economic impact (i.e. consumer and business time savings) as well as the wider impacts.
1 Northern Ireland only.
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Another fundamental difference between the two approaches relates to the fact that the REMI-ECOTEC Model is dynamic in nature, whilst the DfT approach is largely static. Indeed, the REMI-ECOTEC Model allows supply and demand responses to changes in prices and costs and permits substitution between factors of production. Further, the REMI Model is spatially 'nested' and multi-regional, allowing for spillover and competitiveness effects which affect the overall contribution of the transport intervention. Indeed, as a result of the estimated changes in transport costs, the modelling results indicate that the A5 corridor economy will become more competitive relative to other regions within the UK, particularly as a result of agglomeration economies - and, in turn, will result in an increase in the regional purchase coefficient. This means that a greater proportion of the regional demand for goods and services can be fulfilled by regional production as opposed to being fulfilled by imports from other regions. (N.B. it has been assumed that transport costs in all UK regions outside Northern Ireland remain constant over time). An increase in regional production will consequently result in an increase in employment – this being additional to forecast employment used in the wider impacts assessment presented above.
6.6 Strategic Summary: A5 Analytical and Modelling Results
• Traditionally, the assessment of transport interventions has been limited to the quantification of direct welfare benefits to the consumer in terms of time savings, cost savings and improved safety. Whilst such elements are clearly fundamental, an appraisal of a proposed transport intervention is incomplete without reference to wider impacts (WI).
• Whilst the scope and scale of wider impacts may be expected to vary appreciably on an individual scheme basis and reflect the specifics of intervention and economic context, evidence from previous studies suggests that overall welfare benefits may increase by 20-50% through inclusion of wider impacts.
• On the basis of analytical work aligned to DfT's TAG, then the total wider impacts of the A5 measured as GDP are estimated to be £2 million in 2014, rising to £2.8 million in 2029 (excluding changes in output as a result of imperfectly competitive markets).
• Expressed in terms of net present values (NPVs) over a 60 year appraisal period, then the A5 scheme may be expected to yield a net present value of more than £143 million (GDP) in relation to the wider impacts.
• Notably, the GDP effect accruing as a result of agglomeration economies accounts for by far the greater share of the total wider impacts.
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• Closely reflecting changes in employment density, relative GDP effects in connection with the A5 scheme are expected to be most pronounced in Londonderry, Omagh and Strabane.
• By way of complementary analysis, further assessment of the economic impact of the A5 scheme has been undertaken through application of a custom regional economic model, the REMI-ECOTEC Model. Under this analysis – which, importantly, also includes conventional economic impact as well as the wider impacts – then the net impact of an improved A5 on the Northern Irish economy is estimated at some 260 jobs and some £18 million of GDP by 2029.
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7.0 Strategic Summary and Conclusions
In this final section of the report we bring together and distil the principal findings of the macro-economic study.
7.1 Scope of the Study
• The purpose of the study was to assess the likely wider impacts and regeneration impacts of the proposed upgrading of the A5 route between Londonderry and Aughnacloy in Northern Ireland (A5 Western Transport Corridor).
• Whilst the overall importance of the A5 to the Northern Irish economy is widely acknowledged, its role and contribution remains poorly understood and lacking empirical evidence at the present time.
• The results of the macro-economic study will go a considerable way towards addressing this deficit, with the outputs from this study intended to form a significant part of the evidence base required for the Stage 2 Scheme Assessment Report (SAR), scheduled for completion in June 2009.
7.2 Strategic Policy Appreciation
• NI's transportation policy framework is intimately linked to the Region's economic policy and growth aspirations. The RDS places strong emphasis on a need to further exploit the economic development potential of the Key Transport Corridors – including the A5 WTC. A high quality strategic transport network, with quick and reliable journey times is essential to unlocking a balanced spread of future growth across the Region.
• Under NI's Economic Vision for a high value-added, highly skilled, innovative and enterprising economy, transport investment is identified as a key instrument in helping close NI's productivity gap and in reducing levels of economic inactivity.
• With particular regard to the A5 WTC, the IDP for Roads makes a forceful case that construction will serve to trigger significant benefits to the West by improved linkages to and from Dublin and reducing journey times within the North, thereby greatly enhancing the potential for economic growth in the Region.
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• Cross-border co-operation directed at improving economic growth and competitiveness both North and South is strongly and consistently advocated. The ROI Transport 21 plan recognises the importance of developing strategic road links between North and South, with the N2 route – linking with the A5 – identified as a critical route.
• As the regional city and transport hub of the North West, and with a hinterland spanning the political border, Londonderry has a dominant role to play in the development of the entire region. There is therefore a strategic imperative to strengthen the role of the city as the key employment and business growth location for the wider North West.
• Similarly, the further economic development and regeneration of Omagh and Strabane as commercial hubs for the West will be closely conditioned by cross-border co- operation, expanded economic networks and trade facilitated by road infrastructure investment.
7.3 Economic Performance Assessment
• Whilst the A5 WTC has been characterised by appreciable economic growth during recent years – albeit from a comparatively low base - key aspects of the Corridor's economic profile remain deficient. The skills base of the resident workforce requires further improvement, whilst the sectoral focus of the Corridor remains skewed towards primary and production-based activities.
• Consequently, the knowledge economy base is shallow, with comparatively little local employment concentrated in market service sectors including financial and business services.
• Londonderry functions as an expanding commercial hub for the region, whilst there is also considerable evidence to suggest that Omagh is an improving performer. Less encouragingly, Strabane remains a weak performing area within the Corridor.
• The Border region of the ROI may also be characterised as an area which has exhibited a strong growth trajectory, though one which continues to lack economic scale and one which is characterised by a generally unfavourable skills base.
• Notably, the adjacent county of Donegal records a weak attainment against headline economic outcome measures – to a considerable extent reflecting the area's largely weak performance across other economic competitiveness domains.
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7.4 A5 WTC: Evidence of Impact from Businesses and Stakeholders
• Businesses located in the WTC are dependent to a very considerable degree on the A5 for a range of critical business functions: transport of supplies/ inputs, delivery of finished goods, business travel (client meetings etc), staff commuting, and leisure travel (including by visitors and tourists).
• A substantial majority - 3 in 5 – of businesses regarded the A5 as either 'crucial' or else 'very important' to their operations. Constraints cited as a consequence of the current A5 included 'loss of business', 'loss of man hours' or 'increased operating costs', with a significant share of respondents also identified the unreliability of journey times as a key constraint.
• Looking to the future, there is a clear consensus amongst businesses that traffic conditions on the A5 are likely to deteriorate markedly over the next ten years, with the vast majority of respondents – more than 4 in 5 - of the view that traffic conditions on the A5 would become either 'significantly worse' or 'worse'.
• Stakeholders consulted were clearly of the view that the A5 improvement scheme will play a central role in helping to realise a number of long-standing strategic policy objectives, most particularly in delivering balanced regional development within the province.
• As a strategic transport corridor, an upgraded A5, together with corresponding investments in improving port (Lisahally) and airport (City of Derry) facilities, is seen as essential in order for Londonderry to successfully fulfil its role as capital and hub of the wider North West Region, together with further promoting integration and cross-border links.
• Importantly, consultees drew attention to issues rooted in negative investor perceptions of the North West, including of perceived peripherality and of poor accessibility potential. In particular, reliability of journey times had been highlighted as a key issue for both existing and potential investors.
• An unwelcome by-product of journey time unpredictability means that many businesses currently have little alternative but to 'play safe' and factor in extra travel time for business trips and deliveries. The fact that the North West economy is so reliant on the A5 Corridor route also serves to amplify the consequences of accidents.
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• Under the right conditions upgrading may be expected to provide connectivity benefits for principal urban centres along the route, including by supporting local regeneration efforts and improving access to employment for those living in deprived communities.
• It is widely considered that there also exists substantial potential for tourist sector expansion, on account that upgrading the A5 will make the region's latent tourist attractions more accessible, though much will also depend on the successfully realisation of complementary initiatives, including further development of City of Derry airport as a major visitor gateway to the Region.
• Stakeholders also identified a number of other potential benefits which might be expected to accrue – directly or indirectly - as a consequence of the A5 upgrade, including, in relation commuting and labour supply, reliability of emergency/ health services, and road safety improvements.
• The implications for economic development and regeneration afforded by the A5 upgrade will be dependant to a significant degree on the detail of the intervention, particularly relating to route alignment, junction strategy, and access to specific development sites or areas of employment.
7.5 A5 WTC: Evidence of Impact from Quantitative Analysis and Modelling
• The assessment of transport interventions has traditionally been limited to the quantification of direct welfare benefits to the consumer in terms of time savings, cost savings and improved safety. For a more complete assessment reference necessarily need to be made to the existence of wider impacts.
• Although the scope and scale of wider impacts may be expected to vary appreciably on an individual scheme basis and reflect the specifics of intervention and economic context, evidence from previous studies suggests that overall welfare benefits may increase by 20% - 50% through inclusion of wider impacts.
• On the basis of analytical work aligned to DfT's TAG, then the total wider impacts of the A5 measured as GDP are estimated to be £2 million in 2014, rising to £2.8 million in 2029 (excluding changes in output as a result of imperfectly competitive markets).
• Expressed in terms of net present values (NPVs) over a 60 year appraisal period, then the A5 scheme may be expected to yield a net present value of more than £143 million (GDP) in relation to the wider impacts.
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• Notably, the GDP effect accruing as a result of agglomeration economies accounts for by far the greater share of the total wider impacts.
• Closely reflecting changes in employment density, relative GDP effects in connection with the A5 scheme are expected to be most pronounced in Londonderry, Omagh and Strabane.
• By way of complementary analysis, further assessment of the economic impact of the A5 scheme has been undertaken through application of a custom regional economic model, the REMI-ECOTEC Model.
• Under this analysis – which, importantly, also includes conventional economic impact as well as the wider impacts – then the net impact of an improved A5 on the Northern Irish economy is estimated at some 260 jobs and some £18 million of GDP by 2029.
7.6 Concluding Remarks
• From the above discussion, it can be demonstrated that the A5 improvement will strongly support economic and spatial policies for the North West region.
• Reduced journey times and, critically, improved journey time reliability will help unlock productivity potential and boost confidence amongst businesses in the North West, whilst also helping to generate interest from investors outside the region.
• Further, the improvement will help put the conditions in place from delivering major new employment and housing development in Londonderry, thereby allowing the city to more fully function as regional hub and capital. A new and improved A5 can also be expected to act as a powerful stimulus to complementary local development and regeneration in Omagh and Strabane.
• In summary, the A5 will deliver substantial economic benefits over and above those identified in the orthodox transport appraisal (i.e. time savings). Such wider economic and regeneration impacts serve to add further weight to the business case.
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Annex One: Consultees
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Stakeholder Consultees
The following organisations and individuals were consulted as part of the study research:
Table 7.1 List of consultees Name Organisation
John Meehan Derry City Council
John Kelpie Derry City Council
Tony Monaghan Derry City Council
Danny McSorley Omagh District Council
Alison McCullagh Omagh District Council
Iain Fraser Dungannon and South Tyrone District Council
Chris Boomer Northern Ireland Planning Service (Omagh Divisional Planning Office)
Aidan O'Doherty Donegal National Roads Design Office
Janice Tracey Londonderry Chamber of Commerce
Jim Allen University of Ulster (Magee Campus)
Bill Kirk ILEX
Carol Folis ICBAN
Liam McEvoy NIRS
Conor Loughrey NIRS
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Annex Two: Economic Profiling and Performance Assessment
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Table 7.2 Northern Ireland: Indicator Definitions and Sources Domain Indicator Definition and source
Economic Working age Number of working age population (16-59/64 years); 2006 LADB Scale population
Employment Number of people employed; 2006 LADB
Business Stock Number of VAT-registered businesses; 2007 BERR
Dynamism Change in working Change in the number of working age population (16-59/64); 2002 age population and 2006 LADB
Employment change Change in the number of people employed; 2002 and 2006 LADB
Change in business Change in the number of VAT-registered businesses; 2002 and stock 2007 BERR
Sector Sector Structure Concentration of employment by sector (Location Quotient Structure analysis); 2006 Census of Employment
Inward Assistance per head Assistance per head; Invest NI 2008 Investment Investment per head Investment per head; Invest NI 2008
Jobs created and New and safe jobs per £1 million assistance and investment; safeguarded Invest NI 2008
Enterprise Start-ups in financial Number of new VAT-registered businesses in financial services services (broad industrial groups J and K) per 10,000 adult population; 2006 BERR
Business Population Number of new VAT-registered businesses per 10,000 adult
Rate population; 2006 BERR
Business Density Number of VAT-registered businesses per 10,000 adult population; 2006 BERR
Turnover Share of businesses by turnover; 2002 IDBR
Employee Sizeband Share of businesses by number of employees; 2002 IDBR
Labour Market NVQ4+ qualifications Proportion of working age population with NVQ4+ qualifications; (working age) 2006 LADB
No qualifications Proportion of working age population with no qualifications; 2006 (working age) LADB
Economic Activity Proportion of population aged 16 years or older that are Rate (16+) economically active; 2006 LADB
Economic Employment Rate Proportion of population aged 16 years or older in employment; Outcomes 2006 LADB
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Domain Indicator Definition and source
Average weekly gross Average (median) weekly gross pay; 2007 ASHE pay
Table 7.3 Republic of Ireland: Indicator Definitions and Sources Domain Indicator Definition and source
Economic Working age Number of working age population (16-59/64 years); 2006 Census Scale population (CSO)
Employment Number of people employed (15+); 2006 Census (CSO)
Dynamism Change in working Change in the number of working age population (16-59/64); 2002 age population and 2006 Census (CSO)
Employment change Change in the number of people employed; 2002 and 2006 Census (CSO)
Sector Sector Structure Concentration of employment by sector (Location Quotient Structure analysis); 2006 Census (CSO)
Labour Market Third level education Proportion of population aged 15+ with third level education (post- upper secondary education); 2006 Census (CSO)
Primary education Proportion of population aged 15+ with primary education; 2006 (including no formal Census (CSO) education)
Participation rate Proportion of population aged 15+ that are economically active; 2006 Census (CSO)
Economic Employment Rate Proportion of population aged 15+ in employment; 2006 Census Outcomes (CSO)
Disposable Income Disposable Income per person; 2005 County Incomes and per person Regional GDP (CSO)
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Annex Three: Survey Questionnaire
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Proposed Improvements to the A5 Western Transport Corridor
Survey of Local Businesses
[Ask to speak to the manager/ owner for small businesses (50 employees or less) or managing director or similar for larger firms ]
ECOTEC is part of a team undertaking research on behalf of the Northern Ireland Roads Service to look at the economic impact of proposed improvements to the A5 Western Transport Corridor. It is part of a wider route corridor study which is looking at options for upgrading the stretch of the A5 between Londonderry and Aughnacloy.
The A5 Western Transport Corridor is one of five key transport corridor upgrades identified in the Regional Transportation Strategy for Northern Ireland and represents a significant step in longer-term plans to improve connections between Dublin, the City of Londonderry and Donegal.
As part of the research we are undertaking a telephone survey of businesses located in or near to the A5 Corridor. The purpose of the survey is to gain more insight into key business drivers and constraints, and the role of transport in relation to business competitiveness. We would very much welcome your views.
The survey will take no more than 15 minutes to complete. Do you have the time now or would you prefer to be called at a more convenient time? [record appointment details – offer the option of emailing them the questionnaire in advance so that they can consider their response] If they refuse, ask if they would consider completing an email copy (if yes, record email address).
Name of Respondent:
Position:
Company Name:
Location:
Company Details
1. What is the key activity of your business at this site?
2. Which of these options best describes your business?
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Sole trader/ independent J Charity/VCO J Partnership J Private Limited Company J Public Limited Company J Other (Please Specify)......
3. Is this the only site your business operates from?
Yes (single site) J
No – other sites in Northern Ireland (please state location______) J
No – other sites elsewhere (please state location ______) J
4. How long has your business been in operation?
5. How long has your business been in operation at this location?
[all subsequent questions relate to your business operations at this location?]
6. What were your reasons for locating in this area? (state up to three)
7. How many people do you employ at this site? (record both full-time and part-time)
8. Please estimate the proportion of your current workforce who live:
Within 5 miles of the site %
Between 5 and 10 miles from the site %
Between 11 and 20 miles from the site %
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Over 20 miles from the site %
9. Which of the following bands does your annual business turnover fall into? (based on most recent figures)
Under £69,000 (VAT threshold) £69,000 to £100,000 £101,000 to £200,000 £201,000 to £300,000 £301,000 to £500,000 £501,000 to £1m £1-2m £2m+ (please state approx figure ______) Don't know
10. What percentage of your sales is accounted for by sales to customers in:
Northern Ireland %
Republic of Ireland %
11. What percentage of your expenditure is spent on inputs from suppliers based in:
Northern Ireland %
Republic of Ireland %
12. What is the primary mode of transport used:
By your business for transporting good/services to customers
By suppliers in transporting inputs to your business
13. Where are your main competitors based? (based on their share of the market)
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Key Trends and Drivers [again questions relate to operations at this location]
14. Thinking about your business performance over the past five years have you experienced growth in:
Employment Yes/No/Stayed Same
Turnover Yes/No/Stayed Same
15. What have been the key drivers of change/no change in business performance (in terms of employment and turnover) over the past five years?
16. And what about future performance, over the coming five years do you expect this site to grow in terms of:
Employment Yes/No/Stayed Same
Turnover Yes/No/Stayed Same
17. What do you expect will be the key factors determining future growth prospects?
18. What are the key constraints on the growth of your business at this site?
The Role of Transport [again questions relate to operations at this location]
19. Can you indicate for what purpose(s) your business depends on the A5?
Staff commuting Used by customers/ visitors Receiving supplies/ goods Delivering supplies/ goods Business travel (client meetings etc.)
20. How important would you say the A5 is to your business and its operations?
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Crucial Very important Important Of some importance Of little important
21. Is your business currently experiencing any issues or constraints as a result of the present A5? [Prompt as necessary]
Journey times are unpredictable Loss of man hours Increased operating costs Loss of business (new contracts/ visitor numbers etc) Recruitment difficulties
22. In the absence of further improvements to the A5, how do you foresee traffic conditions on the A5 changing over the next 10 years with respect to likely impacts on your business?
Significantly worse Worse Little/ no change Improved DK
23. Under circumstances whereby further improvements were made to the A5 – in terms of upgrading to dual carriageway between Londonderry and Aughnacloy – what might you expect the likely impacts to be for your business operations? [unprompted, then prompt as necessary (tick all that apply)]
Improved business performance Reinvestment/ expansion at current site Improved access to customers/ suppliers Greater access to labour/ employees Little/ no change DK
Other (please specify)………………......
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24. Are there any further comments you would wish to make about the role of the A5, or transport more generally, in relation to your business operations and wider competitiveness in your area?
[Thank interviewee and close]
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Annex Four: Detailed Method and Data Sources
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Value of Time (VoT) and Vehicle Operating Costs (VOC)
Table A4.1 below sets out the values that we have used to convert the transport model data into generalised costs.
Table A4.1 Value of Time and Vehicle Operating Cost Estimates 2008 VoTAM (pence/min) VoTIP (pence/min) VoTPM (pence/min) VOC (pence/km)
Car Commute 10.96 10.87 10.68 8.56
Car Work 49.16 47.97 47.35 9.85
Car Other 14.23 14.81 15.17 8.56
LGV 18.69 18.69 18.69 12.04
HGV 16.28 16.28 16.28 33.73 2014 VoTAM (pence/min) VoTIP (pence/min) VoTPM (pence/min) VOC (pence/km) Car Commute 12.10 12.00 11.79 7.97
Car Work 55.59 54.24 53.54 9.35
Car Other 15.70 16.35 16.74 7.97
LGV 21.10 21.10 21.10 11.66
HGV 18.41 18.41 18.41 32.34 2029 VoTAM (pence/min) VoTIP (pence/min) VoTPM (pence/min) VOC (pence/km) Car Commute 14.9 14.7 14.5 7.6
Car Work 71.9 70.2 69.3 9.1
Car Other 19.3 20.1 20.6 7.6
LGV 27.2 27.2 27.2 11.7
HGV 23.8 23.8 23.8 32.7 Source: Mouchel
Agglomeration Effects
The agglomeration effects have been estimated using the following equation:
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Calculating effective density of employment by zone
Effective density is a measure of the density of employment in and surrounding an area, capturing not only the number of jobs but also their proximity. Effective density is calculated for each zone and for each year over the appraisal horizon using the following formula, for both the base case and do-something scenarios:
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The generalised cost data has been derived from the transport model using the VOT and VOC estimates presented in Table A4.1 above 1. Employment estimates for each of the modelled regions in the base year (2008) and forecast years have been derived from TEMPRO. Employment in the 'do something' scenario has been projected as for the base case. The employment forecast for the base year, 2014 and 2029 is set out in Table A4.2 below.
Table A4.2 Employment forecast 2008 2014 2029
Londonderry 40,513 41,661 46,152
Strabane 14,685 14,896 16,327
Omagh 21,865 23,377 25,945
Dungannon 23,673 28,195 35,998
Donegal 57,308 59,204 62,837
Monaghan 25,664 26,513 28,140 Source: TEMPRO
Calculating productivity elasticities
1 Estimates of transport costs have been applied where trips are 'unobserved' by the transport model.
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Productivity elasticities have been calculated for Northern Ireland based on the evidence presented in Dr Dan Graham's Stage 1 report 1. Assuming that the productivity elasticities provide a reasonable approximation at the sub-national level, employment data from the Census of Employment (2005) has been used to calculate a weighted average elasticity. Areas with relatively high employment in high elasticity industries end up with a higher weighted average elasticity, while those with relatively high employment in low elasticity industries end up with a low weighted average elasticity. Table A4.3 below sets out the productivity elasticity derived for Northern Ireland and used in the analysis.
Table A4.3 Productivity Elasticity with respect to Agglomeration Area Productivity Elasticities Northern Ireland and Republic of Ireland 0.037 England 0.043 Source: ECOTEC analysis based on Graham (2005) and the Census of Employment (2005)
Calculating GDP per worker
GDP per worker for the base year (2008) has been calculated using GVA data from ONS and employment data from the Census of Employment (NI) and CSO statistics (ROI). Notably, GVA data is not generally available for local authority areas and hence GVA for NUTS3 areas has been used for the analysis. GVA per worker in future years have been based on an annual productivity growth of 2% 2. Generally, GDP estimates for sub-regions are not available and hence GVA has been transformed into GDP using the national ratio of GDP/ GVA (approx. 1.13).
Transport model data adjustment
To the extent that the transport model applied is not able to capture all trips between and within the areas used in the analysis (in particular, intra-zonal trips) it has been necessary to discount the transport model outputs on the basis of Census data and reasoned assumptions.
Summary of data sources
1 Wider economic benefits of transport improvements: link between agglomeration and productivity Stage 1 Report (2005) Dr Daniel J. Graham 2 Trend Growth – prospects and implications for policy (HM Treasury)
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Table A4.4 Agglomeration Data Sources Data Source Issues/Method
Generalised cost of Transport Model - Adjusted for travel between zones Mouchel Parkman 'unobserved' trips. Converted into monetary values using VOT and VOC estimates.
Employment (work-place TEMPRO; CSO based) statistics (2006)
Change in employment TEMPRO In the Republic of (work place based) Ireland the employment has been forecast on the basis of the growth in the rest of Northern Ireland (i.e. excluding the A5 transport corridor districts). Employment in the 'do something' scenario has been projected as for the base case.
Productivity elasticity Graham (2005)/ Census Derived using findings of Employment (2005)/ from Graham (2005) and ECOTEC Analysis detailed employment data from the Census of Employment (2005).
GDP per worker (work ONS / HM Treasury / GVA data only available place based) ECOTEC analysis for NUTS3 areas – estimates calculated for the study areas. HM Treasury long term growth/ productivity forecast applied for future years. GVA converted to GDP using national GDP/ GVA ratio.
More People Working
The effect of the transport intervention on the labour supply has been estimated using the following equation:
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Data on the number of workers which commute from areas i to j has been obtained from the 2001 Census. Data on expected wages for workers travelling from zones i to j have been derived using data from the Annual Survey of Hours and Earnings (ASHE). Bearing in mind that the expected wages for new workers may be different to the existing workforce; adjustments have been made using the parameter suggested by DfT.
The change in generalised commuting costs has been obtained from the transport model. Similar to the calculation of agglomeration effects, it has been necessary to make some reasonable assumptions regarding the weighting of generalised cost changes for this wider impact, as a result of some 'unobserved' trips. Data from the 2001 Census has been used to estimate the number of commuters that travel between and within the modelled areas and the generalised cost changes have been adjusted accordingly.
Numerous studies have been undertaken to examine the effect wages have on the labour market. However, following the recommendations of the DfT we have used a labour supply elasticity of 0.1.
Summary of data sources
Table A4.5 More People Working Data Sources Data Source Issues/Method
Generalised cost of Transport Model - Adjusted for travel between areas i Mouchel Parkman 'unobserved' trips. and j in year t Converted into monetary values using VOT and VOC estimates.
Workers living in area i 2001 Census (UK) Assumed that the labour and commuting to j in force in the three ROI year t areas work and live in the same area.
Average wage from Annual Survey of Hours Average wage obtained working in j in year t and Earnings/ Claimant from the Annual Survey Counts/ ECOTEC of Hours and Earnings. Analysis The wages received by the current workforce have been adjusted on the basis of the parameter recommended by DfT.
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Annex Five: REMI-ECOTEC Model
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REMI-ECOTEC Economic Model
The REMI-ECOTEC Economic Model is a structural economic forecasting and policy analysis model. It integrates input-output, computable general equilibrium, econometric and economic geography components. The model is dynamic, with forecasts and simulations generated on an annual basis and behavioural responses to wage, price, and other economic factors.
Importantly, the REMI-ECOTEC Model allows users to answer the “what if” questions about the effects of local policies in areas such as economic development, regeneration, transport and the labour market. As a policy analysis model it can play an important role, for example, in evaluating the total effects of market ‘shocks’ – such as industrial closures and/or major job losses or, conversely, local ‘injections’ – such as new transport investment. Simulations produced using the Model can help guide decision-makers in formulating potential adjustment or forward strategies for their area.
REMI-ECOTEC Model: Modelling Simulations
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Whilst the REMI-ECOTEC Model consists of thousands of simultaneous equations, its structure is relatively straightforward. The overall structure of the model can be summarised in five major blocks: (1) output and demand, (2) labour and capital demand, (3) population and labour force, (4) wages, prices and costs, and (5) market shares. The blocks and their key interactions are shown in Figure A5.1 below.
Figure A5.1 REMI-ECOTEC Model Structure
Importantly, the Model is particularly well suited to transportation projects due to the inclusion of New Economic Geography Theory elements, including:
• based on monopolistic competition; • access to product varieties from local suppliers and from different regions depending on distance deterrence effects; • different delivered prices in the same industry due to transportation costs and different production; and • cross hauling, cluster agglomeration, and labour productivity are explained by microeconomic gains from having choice and variety.
More specifically, the economic geography theory elements are represented through the transportation cost matrices; and the labour access and commodity access indices (described below). As illustrated in Figure A5.2 below, the transportation cost matrices feed into the labour access and commodity access indices.
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Figure A5.2 REMI-ECOTEC Model – Economic Geography Elements
Economic Geography Linkages
Commuter costs Transport costs Accessibility costs
Labour access Commodity access
Economic migration Real wages Intermediate input productivity
Composite prices Intermediate demand
Labour productivity Production costs Consumption
Domestic market share International market share
Employment Output
Transportation Cost Matrix
Describes the amount of cost savings in transporting goods and services due to an increase in transportation efficiency. Decreases in transportation costs lower the delivered price of products, which are computed as the sum of the commodity's cost at its origin and the distance-related cost of transferring the commodity to its destination. This price measure is calculated relative to delivered prices in all other regions, and weights the delivered price from all locations that deliver to the home region. The price changes subsequently translate into lower input costs for producers and into benefits for consumers.
Commuter Cost Matrix
Describes the amount of commuter time savings within or between modelled regions over the average workday. Reduced commuting times are assumed to improve labour productivity, since firms can access more suitable employees from a widened labour pool, while individuals may find jobs that are a better match for their specific attributes. For example, a surgeon may specialise in heart, brain, or knee surgery. Although a brain surgeon may be able to perform a heart operation, the brain surgeon is likely to be less effective than a surgeon who has specific experience with heart surgery. More broadly, locations that can be easily reached by a large number of potential employees can better match jobs with workers. Notably, the impact on productivity will be determined by the occupational and industrial structure of an area.
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Indeed, the matching of workers in specialist/ highly skilled roles is more important than for low skilled jobs. The change in productivity will subsequently feed through into reduced production costs, while also influencing economic migration by altering wage rates 1.
Accessibility Cost Matrix
Describes access to more diverse consumer goods and services by households, as well as access to a broader array of intermediate inputs by employers. Improved accessibility costs diminish production costs due to improved access to well suited factor inputs, and also indirectly influences the location decisions of households via economic migration.
Labour Access Index
Captures the favourable effect on labour productivity and thus labour costs when local firms have access to a wide variety of potential employees and are able to select employees whose skills best suit their needs.
Commodity Access Index
Predicts how productivity will be enhanced and costs reduced when firms increase access to intermediate inputs. This index is also used in the migration equation to incorporate the beneficial effect for consumers of having more access to consumer goods, which is factored into their migration decisions.
Through the transportation cost matrices, the REMI-ECOTEC Model is able to translate traffic flow data from transport models into economic effects. More specifically, the REMI- ECOTEC Model allows for the estimation of effects arising from changes in commuting and transportation costs using the concept of 'effective distance', which is the mechanism through which the theory of economic geography enters the decision-making processes of economic agents in the model. In other words, the model allows you to adjust the effective distance between two centres of economic activity, based on the efficiency of multi-modal transportation between them (i.e. generalised cost of travel). Hence, investment in a specified transport scheme may be expected to reduce the 'effective distance' between two locations and, consequently, increase their interaction, in terms of the flows of labour and commodities. In general, as the 'effective distance' increases, the costs that deter economic activity rise through an exponential process called 'distance decay'. The rate of change by economic sector of the distance decay curve (known as the distance decay parameter, ß) captures both the increased deterrence and the variable impact on flows by sector.
1 Note that the number of employees needed per unit of output depends on the use of other factors of production as well as labour access issues. Labour intensity, which measures the use of labour relative to other factors, is determined by the cost of labour relative to the cost of capital and fuel. The substitution between labour, capital, and fuel is based on a Cobb-Douglas production function, which implies constant factor shares.
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